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Asia palm oil: Prices seen locked in tight range

KUALA LUMPUR: Malaysian palm oil prices were expected to trade in a narrow range this week with the market awaiting fresh crop and export data, traders said.

Private crop forecaster Ivan Wong will issue his February crop estimates later this week ahead of official crop data and export figures for the first half of March due next week.

Traders said the market was lacking incentives on which to base its next move.

"With all these figures which are coming out, hopefully activity will start picking up again. It has been very quiet the past week," said a Kuala Lumpur trader.

"We may see some adjustments in Ivan Wong's exports and stocks estimates for February. Stocks may be smaller," the trader said.

Wong had earlier forecast Malaysian palm oil stocks at end-February at 1.15 million tonnes based on export projection of 605,000 tonnes. Cargo surveyor Societe Generale de Surveillance last week pegged exports for February at 709,405 tonnes.

Traders said the market appeared to have shrugged off India's announcement of additional duty on the import of palm oil for now.

But in the longer term, they said palm oil prices would have to be adjusted to a greater discount to soft oils in order to compete for the Indian edible oil market.

Indian Finance Minister Yashwant Sinha, when presenting the 2000/2001 budget last week, said a special additional duty of four percent will now be applicable on palm olein imports.

With the additional duty, to be calculated on the gross cost of material, import duty and surcharge, imports of palm olein are now subject to a total duty of 32.6 percent, traders said.

In December, India raised the import duty on refined edible oils to 27.5 percent from 16.5 percent. But it left the duty on crude edible oil unchanged at 16.5 percent.

The new duty is not applicable on imports of soft oils.

Palm olein, mostly imported from Malaysia, forms the major part of India's edible oil imports. Soft oils including sunflower, soya and rape make up the rest.

Malaysia's benchmark May palm oil futures contract KPOK0 closed on Friday at 1,067 ringgit, little changed from 1,072 a week earlier. Traders pegged immediate resistance at 1,080 ringgit and support at 1,050.

In Indonesia, traders said the market would closely watch for developments in the Malaysian market this week.

"Most buyers prefer to wait for (this) week before taking new positions and wait for developments in Malaysia," said one trader in Medan, North Sumatra.

"I think Malaysia will be closely watched by players. Any rises there will surely boost local prices," he added.

Olein finished last week at 2,650 rupiah/kg.

Crude palm oil was quoted at 2,172, 2,142 and 2,130 rupiah/kg, based on the weekly tender held by the state marketing centre.-Reuters