The unexpected slump in commodities prices seen over the last couple of weeks is having its fallout all across. The latest to join the bandwagon are edible oil traders from India who are re-negotiating and seeking deferment of some of the palm oil import contract with Malaysian sellers to ward off loses due to sudden fall.
Sources said Indian buyers were renegotiating around 100,000-tonne palm oil contracts because of slump in prices.
According to a Reuters report, Indian buyers have been defaulting on purchases in the last two to three weeks because of plummeting prices and more deferments might come in the next few days.
"The landed price of crude palm oil has dropped from $1,163 per metric tonne to just around $860 per tonne in merely a month, this sudden fall has taken most refiners unawares and they are renegotiating the contracts to ward of loses," a senior industry official said.
He said most traders would renegotiate the contracts or defer their delivery, but would not cancel the shipments as being speculated.
"We are not like buyers from some other countries, who have not only defaulted on payments, but also cancelled shipments," the official added.
Sources said the trouble arose as most Indian buyers had booked their palm oil shipments when prices were ruling at around 4,000 ringgits per tonne, but subsequently prices dropped sharply, the fall being more acute in the last few weeks. This lead to acute liquidity problems with importers and they started defaulting on payment. Prices slipped further Monday on news of defaults by Chinese and Indian traders.
It was quoted at around 2,430 ringgits per tonne, down almost 1.8% from previous close.
The benchmark palm oil prices have slipped 20.2% this year and have nearly halved from their peaks in March on reports of high stocks, slump in crude oil prices and payment defaults by Indian and Chinese buyers.
Crude oil prices have dropped to around $114 per barrel in the last one month, down almost 22% from the all time highs. This is having a cascading impact on palm oil prices as the commodities appeal as alternative fuel diminishes if crude falls.
Meanwhile, though defaults by Indian traders is pulling down prices in Malaysia, but trade sources said that the situation might reverse when demand grows ahead of festivals.
India imports nearly half of its annual edible oil consumption of 12 million tonne because of low local oilseed production. It buys palm oil from Malaysia and Indonesia and soyaoil from Brazil and Argentina....The Financial Express
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