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Indonesia bans palm oil export

ICICI Securities 25 Apr 2022

Buzzing:

Indonesia, which is the world's largest producer of palm oil and meets nearly 45% of the total palm oil supplied into India annually, has decided to ban exports from April 28 till further notice.

Context:

Edible oil prices in India are already up by 50% in the last one year due to global commodity inflation and Russia – Ukraine crisis. Indonesia produces nearly half of the world’s supply of palm oil, which is used in processed foods, soaps, cosmetics & edible oils. The country exports nearly one-third of its palm oil production. The sharp increase in edible oil demand is also due to its diversion towards bio-diesel in Indonesia propelled by higher crude oil prices.

Our perspective:

India imports around 13-13.5 million tonnes (MT) of edible oils every year, of which around 8-8.5 MT (around 63%) is palm oil. We believe restricting the palm oil supplies would result in a spike in edible oil prices in India, which are already up by ~50% in the last one year. We believe palm oil prices could move up by 10-15% due to this ban. The prices of other edible oils like soyabean are also likely to go up in the near term. This would be negative for edible oil, soaps and cosmetics manufacturers. Largest impacted companies - HUL, Marico, Zydus Wellness, Godrej consumer, Jyothy Labs

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