India Oil & Fats insights

Nepal imported about 170,000 tons of crude soybean oil in the first half of this fiscal year and exported 91,000 tons of processed soybean oil to India. The above crude soybean oil was mainly imported from Argentina, Benin, Brazil, Paraguay, Thailand, Togo and Ukraine. Nepal refines and processes the crude soybean oil domestically and then exports it to India. Nepal's domestic production of crude soybean oil is very small, only 31,600 tons per year, which cannot even meet a small part of local demand. The trend of Nepal exporting large amounts of edible oil to India began in the 2018/19 fiscal year, when Nepal imported 13.43 billion rupees of crude soybean oil and exported 2.34 billion rupees of processed soybean oil. In the 19/20 fiscal year, imports increased to 18.72 billion rupees and exports reached 12.69 billion rupees. In the 2021/22 fiscal year, the trend reached its peak, with imports of 56.18 billion rupees and exports of 48.12 billion rupees. That year, the Indian Embassy in Nepal expressed concern about the phenomenon of exporting to India via Nepal to circumvent tariffs. India subsequently reduced tariffs on major raw oils (including soybean crude oil, etc.) to zero in September 2021, and gradually reduced tariffs on refined edible oils, reducing tariffs on imported refined palm oil to 12.5%, and tariffs on imported refined soybean oil and refined sunflower oil to 17.5%. This round of reductions will last until March 2024. After India reduced tariffs, it directly led to a sharp drop in Nepal's processed soybean oil exports, from 48.12 in the 2021/22 fiscal year to 17.5%. In September 2024, the above trend was reversed again. In order to protect domestic farmers from the impact of falling oilseed prices, India resumed the 20% basic tariff on imported crude oil and refined edible oil. Nepalese traders quickly took advantage of the tariff difference to resume business. The International Food Policy Research Institute believes that the sharp fluctuations in tariff policies will have a profound negative impact on trading partners, especially when arranging preferential trade policies. Only stable trade policies can reduce risks and volatility and promote long-term trade exchanges. The former executive director of the Central Bank of Nepal commented that Nepal currently relies on increasing remittances and has foreign exchange reserves to purchase crude oil, but the method of using foreign exchange reserves and the arbitrage-driven trade model are neither sustainable nor conducive to long-term economic stability and cannot create jobs. The report added that although experts and scholars are full of doubts about the long-term feasibility of this trade model, the recovery of soybean oil trade will also help improve Nepal's overall trade.

The palm oil market continues to face significant uncertainties heading into 2025, with supply-side challenges exacerbated by adverse weather conditions and a slower pace of replanting. Palm oil prices in 2024 have remained elevated due to global supply constraints, driven by reduced exports from the largest palm oil producer, Indonesia, as well as recent adverse weather conditions in Malaysia.

Malaysian Rating Corporation Bhd (MARC Ratings) anticipates the palm oil market to continue to face significant uncertainties heading into 2025, with supply-side challenges exacerbated by adverse weather conditions and a slower replanting pace.