According to a statement released by the Federation for European Oil and Proteinmeal Industry (FEDIOL) on 4th May, current palm oil volumes in EU storage facilities could last for several weeks (4-6 weeks). On 28th April, the Indonesian government banned all exports of palm oil and derivative products temporarily, shocking the global palm oil market. Consequently, the Mintec Benchmark Prices (MBP) for EU palm oil climbed to a record high of EUR 1,691/MT on 28th April, up by 13% from the previous day and up by 88% year-on-year (y-o-y).
Indonesia accounts for a large share (56%) of global palm oil exports, of which the EU is a major importer. According to FEDIOL, the EU imports an average of 335,000 tonnes of crude palm oil (CPO) per month from Indonesia, representing over 40% of its total CPO imports. Thus, a halt in supply from Indonesia was expected to limit the supply of palm oil in the EU and drive prices higher in an already tight global vegetable oil market. However, EU palm oil prices have begun to ease on account of sufficient reserves as announced by the FEDIOL. In addition, an anticipated rebound in Malaysian palm oil output is expected to ease supply conditions. As a result, the MBP declined by 8% from the record high reached on 28th April to EUR 1,556/MT on 4th May. EU palm oil prices could potentially continue to decline as stocks last. Nevertheless, the prices could remain elevated until the ban is reversed. Market sources, however, anticipate that this ban could be short-lived on account of insufficient storage facilities to store excess output, as Indonesia consumes less than 40% of its annual palm oil output.
