Asian palm oil buyers seek stable export policies from producers

The Asian Palm Oil Alliance (Apop), a body of palm oil buyers, want producing countries to make sure they have stable export policies after changes last year caused volatility in the trading of the tropical oil, the head of the group said.

India, Pakistan, Bangladesh, Nepal and Sri Lanka are currently members of the Apop and the alliance wants to add more buyers, Atul Chaturvedi, the Apop chairman, said at the annual meeting of member countries in Kuala Lumpur late on Monday.

Importing countries have built refineries to process crude palm oil, but producers are imposing higher export duties on crude palm oil than for refined and making the buying of refined palm oil cheaper than the crude grade, Chaturvedi said.

"The higher duty on crude palm oil is keeping refineries idle in importing countries. Producers need to think about this duty structure, which is hurting buyers," he said.

Dorab Mistry, the director of Indian consumer goods company Godrej International, told the gathering that key producers Indonesia and Malaysia need to realise that Asian countries are their most trusted buyers and that they make purchases without creating trouble for the industry.

The sudden change in export polices such as ban on the exports imposed by Indonesia last year not only disrupts supply chains in importing countries, but also hurts producers and they should think about buyers while making sudden changes, Mistry said.

Indonesia, the world's biggest exporter of palm oil, last year surprised buyers by banning palm oil exports, which forced buyers to secure supplies from rival Malaysia at a record high price and look for alternatives such as soyoil and sunoil.

Furthermore, major producers tend to respond more to demands from buyers in Europe rather than pay attention to the needs of Asian purchasers, said Ajay Jhunjhunwala, president of the Solvent Extractors' Association of India.

"European Union accounts for less than 9% of the global palm oil imports. Asian buyers account for around 40%, but producers try to comply with EU's demands and ignore Asian buyers," he said.

The EU in December passed a deforestation law that requires companies to produce a due diligence statement and provide "verifiable" information that commodities, including oil palm, were not grown on land deforested after 2020, or risk hefty fines.