palm oil fortune magazine

12
NEPAL is a landlocked country bordered by the Tibet Autonomous Region of China in the north and India in the east, west and south. The country is roughly rectangular in shape with a total land area of 147,181sq-km. Topographically, Nepal can be divided into three distinct regions: the mountainous region, the hilly region and the flat plains, known as the Terai, which is an extension of the Gangetic plains of India and forms a low-lying flat land along the southern border. It comprises most of the fertile land and forest area of the country and is home to rich and big river basins. The mountainous region includes the Himalayas, the world’s highest mountain range, while the hilly region lies in the middle of the country. The capital of Nepal, Kathmandu, lies in a valley in the hilly region. Nepal has about 28 million people, with an annual population growth of 2.25%. About 86% of its people live in the rural areas and the rest in the urban areas. The average life expectation is 67 years and literacy rate is 57%. An agricultural economy Nepal is a developing country with an agricultural economy. In recent years, the country’s efforts to expand into manufacturing industries and other technological sectors have achieved some progress. Agriculture is the main economic activity, providing for about a third of its GDP, followed by manufacturing, trade and tourism. The chief sources of foreign currency earnings are merchandise exports, services and tourism. Total GDP in 2009-10 was US$35.813 billion and per capita GDP was US$562, while per capita GDP growth was 3.53% and the per capita income (GNI) in 2010 was US$568. Major crops are rice, maize, wheat, millet and barley. Besides food grains, cash crops such as sugarcane, oilseeds, tobacco, jute and tea are also cultivated. Manufacturing is still at the development stage and it represents less than 10% of the GDP. The edible oils and fats industry is one of the important industries in the manufacturing sector. Oils and Fats Sector Though oilseeds occupy a significant place in the national economy, local production is insufficient to meet the country’s demand. Oilseed crops are mostly grown in marginal and sub-marginal soils by small farmers. They are grown as rain-fed crops, with limited inputs and therefore, the output is low. Oilseeds occupy about 4.8% of Nepal’s cultivated land, with mustard seed making up almost 100% of the total annual production of oilseeds. A small quantity of linseed, to the tune of 6,500 metric tonnes a year, is also produced and the oil from this goes into inedible uses. Besides, about 21,000 MT of soybean is also produced annually, but the entire output is consumed as pulses and as soy flour to enrich the nutritional quality of foods and for animal feed production. It is therefore not placed under oilseed crop production. Hence, Nepal’s annual production of oilseed crops in Table 2 comprises mustard seed only. Consumption of Oils and Fats As per the data available from various sources, the total annual availability of oils and fats, both edible and inedible, in Nepal in 2009-10 was 260,000 MT, of which about 49,000 MT came from local production and the remaining 211,000 MT was imported. Of the 260,000 MT of oils and fats, about 225,000 MT or 87% was consumed for edible purposes and the remaining 13%, which included palm oil, tallow, PFAD, PKO and coconut oil, went into inedible uses. Nepal is mainly a liquid oil consuming country and about 83% of the edible oils and fats consumed are in liquid form and the remaining, solid fat. Solid fat is used both in food industries and in household cooking. There have been no exports of oils and fats by Nepal in the past three years. Among cooking oils, refined soybean oil is the most consumed, at 37%, followed by rape/mustard oil at 30%. Sunflower seed oil accounts for about 9% of the usage while RBD palm oil/olein occupies the remaining 24% consumer market share. It may be mentioned here that about 90% of the palm oil imported for edible purposes is used for production of vanaspati and rest as cooking oil. Soybean oil, palm oil and sunflower seed oil are entirely imported, mainly in crude MALAYSIAN PALM OIL COUNCIL KKDN PP 114669/05/2012 (029946) VOL: 8 2011 ® MPOC FORTUNE DIRECTOR Faudzy Asrafudeen Sayed Mohamed [email protected] MANAGERS Muhammad Kharibi Zainal Ariffin [email protected] Mohd Izham Hassan [email protected] MARKET ANALYSTS Asia Pacific Desmond Ng Kok Hooi [email protected] Lim Teck Chaii [email protected] South Asia Fatimah Zaharah Md Nan [email protected] Middle-East Mohamad Suhaili Hambali [email protected] Africa Nor Iskahar Nordin [email protected] Europe Azriyah Azian [email protected] Americas Ahmad Fadzli Abdul Aziz [email protected] MARKETING & MARKET DEVELOPMENT DIVISION For more information, please contact Tel : 603 - 7806 4097 Fax: 603 - 7806 2272 Continued on page 7 Table 1: Area Under Oilseed (Hectares) 2005-06 2006-07 2007-08 2008-09 2009-10 188,062 184,218 180,328 181,361 199,500 Table 2: Oilseed Production (MT) 2005-06 2006-07 2007-08 2008-09 2009-10 139,322 135,660 134,286 135,494 149,625 Source: Statistical Yearbook of Nepal: 2010 Table 3: Indigenous Production of Edible Oils (MT) 2005-06 2006-07 2007-08 2008-09 2009-10 45,976 44,767 44,314 44,713 49,376 Note: Edible oil quantity is calculated @ 33% oil extraction rate Nepal - a Potential Destination for Malaysian Palm Oil

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The Malaysian Palm Oil FORTUNE is MPOC's (Malaysian Palm Oil Council) monthly market update covering the latest development in the oils and fats market. This newsletter can now be downloaded via MPOC's Website (http://www.mpoc.org.my). You can also make use of the Malaysian Palm Oil FORTUNE as your platform to advertise your products/services. We are ready to offer advertisement space in each monthly issue at very affordable rates.

TRANSCRIPT

Page 1: Palm Oil Fortune Magazine

NEPAL is a landlocked country bordered by the Tibet Autonomous Region of China in the north and India in the east, west and south. The country is roughly rectangular in shape with a total land area of 147,181sq-km.

Topographically, Nepal can be divided into three distinct regions: the mountainous region, the hilly region and the flat plains, known as the Terai, which is an extension of the Gangetic plains of India and forms a low-lying flat land along the southern border. It comprises most of the fertile land and forest area of the country and is home to rich and big river basins. The mountainous region includes the Himalayas, the world’s highest mountain range, while the hilly region lies in the middle of the country. The capital of Nepal, Kathmandu, lies in a valley in the hilly region.

Nepal has about 28 million people, with an annual population growth of 2.25%. About 86% of its people live in the rural areas and the rest in the urban areas. The average life expectation is 67 years and literacy rate is 57%.

An agricultural economyNepal is a developing country with an agricultural economy. In recent years, the country’s efforts to expand into manufacturing industries and other technological sectors have achieved some progress. Agriculture is the main economic activity, providing for about a third of its GDP, followed by manufacturing, trade and tourism. The chief sources of foreign currency earnings are merchandise exports, services and tourism.

Total GDP in 2009-10 was US$35.813 billion and per capita GDP was US$562, while per capita GDP growth was 3.53% and the per capita income (GNI) in 2010 was US$568. Major crops are rice, maize, wheat, millet and barley. Besides food grains, cash crops such as sugarcane, oilseeds, tobacco, jute and tea are also cultivated. Manufacturing is still at the development stage and it represents less than 10% of the GDP. The edible oils and fats industry is one of the important industries in the manufacturing sector.

Oils and Fats SectorThough oilseeds occupy a significant place in the national economy, local

production is insufficient to meet the country’s demand. Oilseed crops are mostly grown in marginal and sub-marginal soils by small farmers. They are grown as rain-fed crops, with limited inputs and therefore, the output is low. Oilseeds occupy about 4.8% of Nepal’s cultivated land, with mustard seed making up almost 100% of the total annual production of oilseeds.

A small quantity of linseed, to the tune of 6,500 metric tonnes a year, is also

produced and the oil from this goes into inedible uses. Besides, about 21,000 MT of soybean is also produced annually, but the entire output is consumed as pulses and as soy flour to enrich the nutritional quality of foods and for animal feed production. It is therefore not placed under oilseed crop production. Hence, Nepal’s annual production of oilseed crops in Table 2 comprises mustard seed only.

Consumption of Oils and FatsAs per the data available from various sources, the total annual availability of oils and fats, both edible and inedible, in Nepal in 2009-10 was 260,000 MT, of which about 49,000 MT came from local production and the remaining 211,000 MT was imported. Of the 260,000 MT of oils and fats, about 225,000 MT or 87% was consumed for edible purposes and the remaining 13%, which included palm oil, tallow, PFAD, PKO and coconut oil, went into inedible uses. Nepal is mainly a liquid oil consuming country and about 83% of the edible oils and fats consumed are in liquid form and the remaining, solid

fat. Solid fat is used both in food industries and in household cooking. There have been no exports of oils and fats by Nepal in the past three years.

Among cooking oils, refined soybean oil is the most consumed, at 37%, followed by rape/mustard oil at 30%. Sunflower seed oil accounts for about 9% of the usage while RBD palm oil/olein occupies the remaining 24% consumer market share. It may be mentioned here that about 90% of the palm oil imported for edible purposes is used for production of vanaspati and rest as cooking oil. Soybean oil, palm oil and sunflower seed oil are entirely imported, mainly in crude

MALAYSIAN PALM OIL COUNCIL KKDN PP 114669/05/2012 (029946) VOL: 8 2011

®

MPOC FORTUNE

DIRECTOR

Faudzy Asrafudeen Sayed Mohamed [email protected]

MANAGERS

Muhammad Kharibi Zainal Ariffin [email protected]

Mohd Izham Hassan [email protected]

MARKET ANALYSTS

Asia Pacific Desmond Ng Kok Hooi [email protected]

Lim Teck Chaii [email protected]

South Asia Fatimah Zaharah Md Nan [email protected]

Middle-East Mohamad Suhaili Hambali [email protected]

Africa Nor Iskahar Nordin [email protected]

Europe Azriyah Azian [email protected]

Americas Ahmad Fadzli Abdul Aziz [email protected]

MARKETING & MARKET DEVELOPMENT DIVISION

For more information, please contact Tel : 603 - 7806 4097 Fax: 603 - 7806 2272

Continued on page 7

Table 1: Area Under Oilseed (Hectares)

2005-06 2006-07 2007-08 2008-09 2009-10

188,062 184,218 180,328 181,361 199,500

Table 2: Oilseed Production (MT)

2005-06 2006-07 2007-08 2008-09 2009-10

139,322 135,660 134,286 135,494 149,625

Source: Statistical Yearbook of Nepal: 2010

Table 3: Indigenous Production of Edible Oils (MT)

2005-06 2006-07 2007-08 2008-09 2009-10

45,976 44,767 44,314 44,713 49,376

Note: Edible oil quantity is calculated @ 33% oil extraction rate

Nepal - a Potential Destinationfor Malaysian Palm Oil

Page 2: Palm Oil Fortune Magazine
Page 3: Palm Oil Fortune Magazine

I WAS expecting a rebound in the market last month, when the price of FCPO was hovering above RM3,000 per metric tonne. However, the price fell below RM3,000 to a low of RM2,920 before rebounding to settle at RM3,002 on Aug 19. For the past one month, FCPO declined 1.6% after trading between RM2,917 and RM3,164.

The price was able to rebound from RM2,917/MT because of a decline in inventory and rising exports. Trading volume declined last month, with an average daily trading volume of 12,400 contracts as compared with 13,500 contracts in the previous month. Open interests maintained the same on-month at 34,250 contracts as at Aug 19.

There has been a steady increase in palm oil exports the past few months, but inventory remains high. MPOB’s data shows that Malaysian palm oil production for July declined 0.1% to 1.75 million MT. Palm oil stocks at the end of July fell 2.8% to 1.99 million MT, while palm oil exports for July climbed 9.1% to 1.73 million MT.

In the latest export estimates, cargo surveyor Intertek Agri Services estimated an increase of 14.5% in Malaysian palm oil exports for the first 20 days of August at 1.17 million MT.

The price of soybean has declined slightly for the past one month, but remains high. The spread between soybean and crude palm oil prices continues to widen. Since the beginning of this year, the price of soybean has declined 2%, but the price of crude palm oil is down 20%.

The US dollar has also been declining steadily for the past one year and like the soybean price, it has declined about 2.4% from the beginning of this year. The Malaysian ringgit is currently quoted at RM2.99 against the dollar, which is about the same level as a month before.

The trend is still bearish in the longer term as the price is trading below mid- to long-term 60- and 90-day moving averages. In the short term, however, the trend has started to move sideways because of the flat 30-day moving average direction and price whipsawing this short-term average.

The 30- to 90-day moving averages currently range between RM3,070 and RM3,190. The Ichimoku Cloud indicator continues to widen downwards, showing strong resistance in the downtrend and the cloud ranges between RM3,120 and RM3,240. Therefore, from the moving averages and Ichimoku Cloud, the resistance level for FCPO ranges between RM3,100 and RM3,200 and as long as the price stays below this resistance level, the price trend will remain bearish.

Although slightly bullish-biased in the short term, the momentum indicators are showing weak momentum in the longer term, with the bears currently controlling the market. The RSI, MACD and Momentum Oscillators readings are still below the middle levels.

Furthermore, the FCPO price is currently trading at the bottom range of the Bollinger Bands, which started to expand in early August. These momentum indicators indicate no sign of price trend

reversal and without this, we do not expect the price to stage a strong rebound, despite having better fundamentals.

From the technical analysis, the FCPO is expected to consolidate around RM3,000/MT. Unless the FCPO price breaks above the resistance level mentioned earlier, we are going to see the price declining further and the next support level the price of FCPO may find is at RM2,800 in the short term. In the longer term, I would only expect the price to change its trend in the last quarter of this year.

I would also like to take this opportunity to wish all Muslims, especially friends in MPOC and readers of Palm Oil Fortune magazine, “Selamat Hari Raya Aidilfitri”.

by Benny LeeChief Market Strategist of NextView Group

MARKETWatchW

MPOC FORTUNE •  3

Mr. Benny Lee is a private trader, trainer and sought-after speaker in the financial market. He is the Chief Market Strategist for NextView, a pan-Asian multiple-markets financial terminal and data vendor, investor education and conferences for both professional and retail investors in the Asia region. For more information, log on to www.nextview.com.

The above analysis and commentary is based on the writer’s personal opinion towards the price of crude palm oil using technical analysis and should not be construed as any form of investment advice. The writer will not be responsible for any decision made from using the above article.

FCPO daily chart as at 19 August 2011. Charted by Benny Lee using NextView Advisor Professional

Price fails to rebound at support, strong resistance

Page 4: Palm Oil Fortune Magazine
Page 5: Palm Oil Fortune Magazine

MPOC FORTUNE •  5

THE MARKET for biomass in both the energy and furniture-making sectors is rapidly growing, in line with expanding efforts to tackle the causes of global warming. With more countries setting higher targets for renewable resources, in both energy mix and furniture making materials, biomass, especially palm biomass, has been identified as the major resource for both these sectors, which also meets the “green” requirements and aspirations.

Of the total output from the oil palm tree, about 10% is palm oil while 90% is in the form of oil palm biomass, which has yet to be fully exploited. In 2010, the local oil palm sector generated an estimated 80 million metric tonnes of biomass.

Prime Minister of Malaysia, Dato’ Seri Najib Tun Razak, announced at the inaugural meeting of the Global Science and Innovation Advisory Council (GSIAC) for Malaysia, which he chaired at the New York Academy of Sciences in New York recently, that technology companies from the United States, with the capacity to invest and produce products from oil palm biomass, would be matched with Malaysian companies to garner profits for the country, which is the world’s largest producer of palm oil.

In Europe, almost 70% of all renewable energy is derived from biomass, which is evidenced by the 800 solid biomass power plants in place in the region. Similar patterns are also found in countries with abundant biomass resources, such as Brazil, China, Canada, Indonesia and Thailand.

In Malaysia, an estimated 15 billion cubic metres of biogas could have been generated from the 57.4 million MT of Palm Oil Mill Effluents (POME) discharged by the oil palm industry last year. Apart from POME, palm shells and fibres are already being used to generate electricity in many palm oil mills nationwide.

In addition to energy, use of biomass in the non-energy sector is also gaining prominence, for the economic potential of palm biomass in industrial production tends to fetch a higher value than its use in electricity generation. For example, the carbohydrate fraction of biomass EFB or POME can be turned into sugars for fermentation into high value chemicals and materials, while wood chips, oil palm trunks and fronds can be converted into paper and wood pulp, eco-friendly packaging material or green building

materials.

Biomass as renewable energyMalaysia is among the world’s top producers of palm oil, with the current planted area around 4.85 million hectares. The success of the country’s palm oil industry arises from the confluence of government and private sector strategies and policies. In spite of the huge production, the oil makes up only about 10% of the total biomass produced in the plantation. The remainder is a huge amount of oil palm wastes such as oil palm shells, mesocarp fibres and empty fruit bunches (from the mills) and oil palm fronds and oil palm trunks (from the field during replanting).

Much of the 70 million MT of oil palm biomass produced annually is burnt or left to rot. The Malaysian Government has realised that oil palm biomass can be as valuable as crude palm oil and has come out with the Oil Palm Biomass Roadmap that will streamline efforts to convert this waste into wealth-generating industries.

Soaring energy prices are a reminder of the essential role that affordable energy plays in sustainable economic growth and higher human development. Safeguarding energy supply, especially from clean, indigenous resources, has become more pressing than ever. Current patterns of energy generation and use impact negatively on the environment at local and global levels.

The search for alternative materials to reduce dependency on non-renewable resources has been part of sustainable development efforts. With increasing development of newer bio-composites for the furniture industry, it is imperative to investigate the acceptance level of users for this new green product. Sustainable or green products are one strategy to become competitive in the

current global market. The use of sustainable materials is reported to have led to “competitive advantages”, since it is widely accepted that the bulk of the cost of a product and its production processes are at the design stage.

The degradation of our environment as a result of fossil fuel use has brought about a global re-evaluation of energy use in all economic sectors. The need for the use of sustainable energy has become more and more evident. As such, renewable energy is envisaged to become an increasing share in Malaysia’s electricity generation. With abundant sources available, such as biomass and biogas, the palm oil industry is likely to become ever more prominent in adopting renewable energy.

Malaysian scientists are going beyond using just the oil from the palm tree, and are proposing to convert fronds, empty fruit bunches and palm kernel shells harvested from plantations into renewable electricity, cellulose ethanol, biogas, biohydrogen and bioplastic. Thus, by using both the biomass from the plantation as well as the residues from palm oil production (fibres, kernel shells and palm oil mill effluents), bioenergy from oil palm plantations can help to reduce greenhouse gas emissions. Examples of these production techniques have been registered as projects under the Kyoto Protocol's Clean Development Mechanism.

By using palm biomass to generate energy, fuels and biodegradable products, both the energy balance and the greenhouse gas emissions balance for palm biodiesel is improved. For every metric tonne of palm oil produced from fresh fruit bunches, a farmer harvests around six MT of palm fronds, one MT of palm trunks, five MT empty fruit bunches, one tonne of press fibre (from the mesocarp of the fruit), 0.5 MT of palm kernel endocarp, 250kg of palm kernel press cake, and 100 MT of palm oil mill effluents.

(Look out for part 2 in Vol. 9…)

MARKETInsightsIns gBiomass - Growing Demandin Energy and non-Energy Sectors

ve in the (Look

At palm oil mill

At palm oilrefinery

By-ProductAqueous by- products

ProductCrude Palm Oil

By-ProductBiomass

FeedPalm fruit bunches

By-ProductPalm Fatty Acid Distillate

By-ProductBiomass

Palm Pressed FibresEmpty Fruit Bunches Shell

At palm oilrefinery

Crude Palm Oil

Palm

ProductRefined Palm Oil

PART 1

Page 6: Palm Oil Fortune Magazine

6 •  MPOC FORTUNE

THE UNITED Arab Emirates is a federation of seven individual states situated in the southeast of the Arabian Peninsula, on the Persian Gulf and bordering Oman and Saudi Arabia. The seven states, which are termed “emirates”, are Abu Dhabi, Dubai, Fujairah, Ras al-Khaimah, Sharjah, Ajman and Umm al-Quwain.

Abu Dhabi is the largest mineral oil producer within the UAE, with 95% of its output being oil and remaining, gas. Fossil fuel has made Abu Dhabi the wealthiest in the UAE and the country has invested more than US$1 trillion worldwide. The GDP per capita is now US$63,000, which is far above the average income in the UAE, ranking Abu Dhabi third in the world after Luxembourg and Norway.

At the same time, non-oil economic activities achieved satisfactory growth rates, with non-oil GDP growing by 6% in 2009. Overall, the GDP growth rate in 2010 recorded around 4% and is expected to be higher in 2011 with the improving economic environment of the region and stable oil prices.

Dubai produces 50,000 to 70,000 barrels (11,000 cubic metres) of oil a day, which is a 2% share of the total oil and gas produced in the UAE daily. Dubai accounts for around 80% UAE's non-oil trade, consisting of real estate and construction (22.6%), trade (16%), entrepôt (15%) and financial services (11%). Dubai imports around 80% of its food needs and its economy, which accounts for almost a third of the UAE's overall output, grew 2.5% year-on-year in the first nine months of 2010.

Direct non-oil exports surged by 36% year-on-year from January to October 2010, the strongest rise in the last five years and boosted largely by the global economic recovery, while re-exports were up by 23%. The economy may expand by up to 5% in 2011.

Overall, non-oil and gas GDP now constitutes 64% of the UAE’s total GDP. This trend is reflected in Abu Dhabi and Dubai, with substantial new investment in industries, real estate, tourism, financial market and retail. The UAE has a vibrant free economy, with a significant proportion of its revenues arising from the export of oil and gas. Successful efforts have been made to move away from dependence on hydrocarbons and a solid industrial base has been created,

together with a very strong services sector. The establishment of free trade zones has been an important feature of this diversification policy.

Business Infrastructure in UAESince its establishment in 1971, the UAE has enjoyed an enviable degree of political stability, unequalled in the region. This has enabled the implementation of consistent, sound economic policies and the reinforcing of the region’s social structure to produce one of the most tolerant, prosperous, secure and safest societies in the world. Dubai and Abu Dhabi have been ranked the top two

cities in the Middle East region for quality of life. Long-time investors include a wide range of multinational companies headquartered across the globe.

Special economic zones and duty free zones offer 100% ownership, repatriation of profits and capital as well as exemption from taxes. Outside of these areas, significant incentives are offered to investors and corporate governance provisions ensuring transparency and accountability are enforced. Corporate taxes are reserved only for branches of foreign banks and oil-producing companies. A negligible 5% tariff is imposed on goods imported from non-Gulf Cooperation Council (GCC) countries, but tobacco and alcohol products are subject to 50% Customs duty.

The UAE’s strategic location between Asia, Europe and Africa is a major advantage to investors, particularly the country’s proximity to some of the world’s fastest growing economies in Asia. Collectively, India and China, which alone comprise almost 40% of the world’s population and support a combined GDP in excess of US$5 trillion,

provide significant economic and trading opportunities.

Infrastructure in the UAE is second to none. Telecommunications, including mobile and fixed telephony as well as Internet access is on par, if not better, than the world’s largest international business hubs. The road network is constantly upgraded and ports and airports are world class. To date, the government has invested heavily in infrastructure development, but it has also opened up its utilities and other infrastructure to greater private sector involvement, so much so that public-private partnerships are now the norm.

All these have made the UAE one of the most popular business hubs in the world, as well as the re-export market for several products and commodities, including oils and fats, to the region and the neighbouring regions.

Economic CrisisIn 2008-09, falling oil prices, collapsing real estate prices and the international banking crisis hit the UAE hard, especially Dubai. Half of all the construction projects, totalling US$582 billion, were either put on hold or cancelled, leaving a trail of half-built towers on the outskirts of the city. Property value in Dubai dropped drastically, by as low as 50% to 60% in some of the areas.

Towards 2010, Dubai managed to stabilise its economy with a US$20 billion sovereign bond programme from neighbour Abu Dhabi. For the short-term, it should be sufficient to meet the city's refinancing needs this year and lend stability to the economy. It was a relatively good year for Dubai in 2010, especially when compared with the volatile 2009. The economy began to recover and, more importantly, Dubai World reached an agreement with its lenders to restructure part of its debt. These were positive developments, but the city needs to plan ahead as a significant amount of Dubai’s debt will mature in 2011.

MARKETInsightsIns g

Continued on page 11

Moving MPO Market Ahead in the UAE

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Chart 1: UAE Imports

Palm Oil Total Oils & Fats

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Source: Oil World

Page 7: Palm Oil Fortune Magazine

MPOC FORTUNE •  7

form, and marketed after local refining. Mustard oil, which is the traditional cooking oil and is consumed in virgin form, is obtained from locally-grown seeds. Besides, some quantities of mustard and canola seeds are also imported and crushed locally for oils, which are also marketed in virgin form.

Besides the three major edible oils, some quantities of tallow, vegetable fat, butter, margarine, PKO, coconut oil and PFAD are also regularly imported, but because of very small import quantities, their impact on the total import volume of oils and fats is insignificant.

The edible oil refining industry of Nepal grew primarily based on opportunities for the export of vanaspati to India at a reduced tariff under the bilateral India-Nepal Trade Treaty and accordingly, almost all the refineries were set up in towns near the Nepal-India border, including Birgonj and Biratnagar. In recent years, a local demand was created as well, both for refined oil as well as vanaspati.

Besides the consumption of edible oils as household cooking oil and for vanaspati production, the biscuit and noodle industries are two major food industries of Nepal that are large consumers of edible oils and fats. Nepal’s edible oil refining industry runs on these demands. Of the 21 registered refineries, 18 are active and of these, only 10 run regularly, though at lower capacities, and the other eight, intermittently. The refineries are listed in Annexure A.

Edible Oil Imports Nepal is not able to produce sufficient edible oils to meet domestic requirements and therefore has to depend on the import of oils and fats, both edible and inedible. Imports are growing in pace with the population and economic growth. Commodity-wise import details of oils and fats in the 2007-08 and 2009-10 periods are listed in Table 4.

Vanaspati IndustryNepal’s vanaspati industry was established in the 1970s. The initiative to develop a domestic vanaspati industry was based on a 1972 UNDP study, which encouraged Nepal to establish such an industry to provide a cheap, alternative source of nutrition for its people.

The industry grew rapidly during the 1981-95 period. From just two refineries prior to 1981, the number grew to 16 in 1996. As palm oil is the most suitable raw material for vanaspati production, Nepal’s import of palm oil started then. The India-Nepal Trade Treaty has benefited vanaspati industry the most as it provided Nepali vanaspati better access to the Indian market. At present, 18 refineries are in operation with an annual installed capacity of a little over 200,000 MT of vanaspati.

After five years of free trade with India, the trade treaty between the two countries was revised in 2002, limiting India’s import of vanaspati from Nepal to 100,000 MT annually to safeguard the Indian vanaspati industry. Nepal’s vanaspati industry was very much

dependent on India as its biggest export market and the imposition of the 100,000 MT import quota by India affected the industry badly.

Vanaspati exports to India has almost stopped since the 2008-09 fiscal year as Nepali vanaspati has lost price competitiveness against locally produced vanaspati in India, for Nepal itself is dependent on the import of its palm oil through India. As a landlocked country, Nepal is forced to use Indian seaports for its imports, including edible oils.

Nepali importers also have to cope with storage charges at Indian seaports and transport costs of the goods from the seaports to their country, besides other charges, all of which contribute to the increased cost of vanaspati production in Nepal. Thus, Nepal lost its price competitiveness against Indian vanaspati. With the erosion of the exports of vanaspati to India, palm oil import by Nepal also declined substantially. Imports today are only to cater to local demand.

Palm Oil ImportsThe import of palm oil by Nepal started back in 1983 with 1,510 MT and this reached its peak in 2003, when 188,056 MT were imported. Later, the annual import volume of palm oil began to vary with the export volume of vanaspati to India. During this period, apart from using palm oil as raw material for vanaspati, some local consumption opportunities for palm oil in the form of RBD palm oil and RBD palm olein also

MARKETInsightsIns gContinued from page 1

Continued on page 9

Nepal - a Potential Destinationfor Malaysian Palm Oil

Table 4: Nepal Imports of Oils and Fats in 2007-2008 to 2009-2010 (In MT)

Commodity 2007-2008 2008-2009 2009-2010

Crude Palm Oil 71,740 41,354 62,384

Refined Palm Oil - - 13,097

Crude Degummed Soyabean Oil 50,285 66,995 84,506

Crude Sunflower Seed Oil 2,112 4,493 21,676

Refined Sunflower Seed Oil N/A N/A 1,280

Rape/Mustard Oil* 8,132 12,908 18,014 (21,402) (33,970) (47,406)

Tallow N/A N/A 5,522

Others N/A N/A 4,684

Total 132,269 125,750 211,163

Source: Custom Authority of Nepal/Nepal Vegetable Ghee Oil Manufacturers Association

*Figures are oil equivalent of imported seeds @38% oil extraction. Bracketed figures are quantity of oils seeds in tonnes.

Table 5: Import Tariff on Oils and Fats (2010-2011)

Import Duty (%)

Crude Soyabean Oil 5

Refined Soyabean Oil 10

Crude Palm Oil 5

Refined Palm Oil 15

Crude Sunflower Seed Oil 5

Refined Sunflower Seed Oil 10

Crude Palm Kernel Oil 5

Refined Palm Kernel Oil 10

Animal Fat 7.5

Vegetable Fat 15

Source: Custom Authority of Nepal

Page 8: Palm Oil Fortune Magazine
Page 9: Palm Oil Fortune Magazine

MPOC FORTUNE •  9

emerged – and these are the main reasons for the import of palm oil today.

Out of some 75,000 MT of palm oil, mainly in crude form, imported during fiscal 2009-10, about 45,000 MT or 60% was used in vanaspati production, about 5,000 MT (7%) for production of RBD palm oil and RBD palm olein and the remaining 25,000 MT ( 33%) went into inedible uses.

At present, Indonesia is the main source of palm oil imported by Nepal. Importers prefer to get their consignments through Singapore-based companies because of

the competitive price, flexible terms offered and regular interaction. In the 2009-10 period, only 13,603 MT or 18% of the total palm oil imported came from Malaysia.

Out of the total annual import of palm oil, about 33% goes into inedible uses and the rest into the production of vanaspati and cooking oils. Besides crude/refined palm oil, some quantities of palm-based vegetable fats and margarine, PKO and PFAD are also imported regularly, but because of their insignificant quantities,

these items have little impact on the total import of oils and fats.

Apart from the vanaspati industry, local noodles, biscuit and bakery and soap industries are the major consumers of palm oil and its byproducts. The annual production of these items is listed in Table 9.

ConclusionNepal is mainly dependent on imports to meet its demand for oils and fats as local production is quite insufficient. The country’s limited agricultural land makes any increase in the local production of

oilseed crops quite impossible. On the other hand, consumption is increasing with population increase, lifestyle changes and food habits as a result of the improving economy and living standards. Nepal therefore is a potential market for MPO.

As the re-emergence of vanaspati exports to India is dismal, it is better to look at local consumption of oils and fats. Besides palm oil, palm olein may be focused as a future strategy for the Nepali market and in line with this

strategy, some promotional activities should be planned. Fakhrul

Annexure – AFull list of Nepal’s edible oil refineries.

1. Swastik Oil Industries Pvt. Limited2. Nandan Ghee & Oil Ind. Pvt. Ltd.3. Shree Krishna Oil Refinery &

Vegetable Ghee Ind. Pvt. Ltd.4. Shree Shiva Shakti Ghee Udyog

Pvt. Ltd.5. Sushil Vanaspati Pvt. Ltd.6. Manokamna Veg. Ghee & Oil Ind.

Pvt. Ltd.7. Annapurna Veg. Pro. Pvt. Ltd.8. Baba Vegetable Ind. Pvt. Ltd.9. Ganpati Vanaspati Ltd.10. Pashupati Khadya Tel Udyog Pvt.

Ltd.11. Narayan Veg. Ind. Pvt. Ltd.12. Nirvan Vanaspati Pvt. Ltd.13. Kusum Oil Ind. Pvt. Ltd.14. Arti Vegetable Products Pvt. Ltd.15. Shriraim Refined Products Pvt. Ltd.16. Arun Vanaspati Pvt. Ltd.

(Operations Temporarily on Hold)17. Quality Oil Refinery Pvt. Ltd.18. Siddhartha Refinery & Solvents

Ind. Pvt. Ltd.19. Nepal Vanaspati Limited

(Operations Temporarily on Hold)20. Laxmi Vanaspati Pvt. Ltd.

(Operations Temporarily on Hold)21. Narayani Oil Refinery Ind. Pvt. Ltd.

MARKETInsightsIns gContinued from page 7

Nepal - a Potential Destinationfor Malaysian Palm Oil

Table 6: Nepal Vanaspati Production (MT)

Commodity 2003-04 2004-05 2005-06 2006-07 2007-08

Vanaspati 72,051 199,587 179,239 188,200 195,728

Source: Economic Survey of Nepal, Ministry of Finance

Table 7: Value of Vanaspati Export and Share in Total Exports

2004-05 2005-06 2006-07 2007-08 2008-09

Value (Million Nepali Rs.) 4,635.9 3,861.7 4,136.5 2,133.2 9.1

Share in Total Export (%) 7.9 6.4 7.0 3.6 0.0

Source: Nepal Rastro Bank

Table 8: Import of Palm Oil 2007-2008 to 2009-2010 (MT)

Commodity 2007-2008 2008-2009 2009-2010

Crude Palm Oil 71,740 41,354 62,384

Refined Palm Oil n/a n/a 13,097

Source: Custom Authority of Nepal/Nepal Vegetable Ghee Oil Manufacturers Association

Table 9: Annual Production of Noodles, Soap & Detergent in Nepal (MT)

Commodity 2005-2006 2006-2007 2007-2008

Noodles 32,334 35,567 36,990

Soap 44,821 47,062 48,944

Detergent 3,331 3,497 3,637

Source: Economic Survey of Nepal

Page 10: Palm Oil Fortune Magazine

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- Fima Bulking Services Berhad

- Fimachem Sdn Bhd

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Butterworth

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Jalan Parang, 2nd Extension, North Port, 42000 Port Klang, Selangor, MALAYSIATel: +603 - 3176 7211 Fax: +603 - 3176 5641 Email: [email protected]

http://www.fimabulking.com

Located in a free commercial zone offer excellent opportunities for• Import and export• Transhipment• MDEX tender (approved

delivery point)• Regional collection / distribution hub

Facilities available : • Carbonsteel• Coated & stainless tanks come

with heating facilities & nitrogen blanketing.

Malaysia’s Largest Independent Common-user Multi-purpose Liquid

Bulk Terminal Operator

Page 11: Palm Oil Fortune Magazine

The value of Dubai debt maturing in 2011 is estimated at US$18 billion. To refinance part of the maturing debts, Dubai is likely to issue more bonds. Market reaction to Dubai-related bonds in 2010 was positive and new bond issues were oversubscribed. It is also worth noting that participation in Dubai’s bonds was truly global, with regional, Western and Asian investors showing interest. With interest rates in the US likely to remain low in 2011, investors will be searching for yields. Dubai bonds can offer attractive yields and investor interest should be high.

Oils and Fats Market trendWith the UAE economic situation recovering, import trends for edible oils and fats have shown the same trend in 2010 (Chart 1), followed by a good inflow of palm oil into the country. Imports of oils and fats increased by 44.2% to 757,300

metric tonnes and palm oil imports increased by 62.5% to 490,000 MT. Favourable trends supported by a better economic situation in the region, as well as globally, improved the UAE’s re-export market, coupled with a better financial year. Exports of oils and fats increased by 28.3% to 771,100 MT, with palm oil’s share up going up by 40% to 350,000 MT. Of 1.083 million MT of oils and fats available in UAE, which includes imports and local production, only 22.7% was used for local consumption. UAE, especially Dubai, blessed with its strategic location and port, is an excellent hub for re-exports. Products from the West and East converge in Dubai and are redistributed to other countries, beyond the Middle East region as well.

Palm oil has been successfully established in the UAE and is using this advantage to penetrate other countries in the region. Since 2003, palm oil has dominated more than 50% of the oils and fats imported into the UAE and recently showed its good performance after a drop in 2007, but still managed to get a share of more than 50% (Chart 2). The setting up of branches and agencies in UAE by some of the Malaysian companies has given a greater advantage to Malaysian palm oil entering the markets in the region.

Of the 490,000 MT of palm oil the UAE imported last year, some 73.9% came

Palm Oil Other Oils & Fats

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

100%

80%

60%

40%

20%

0%

Chart 2: Palm Oil vs Other Oils & Fats Market Share

Source: Oil World

MARKETInsightsIns gContinued from page 6

AnnualEVENTS2011

This Annual Forum is the 9th gathering in its series. The half-day forum event will focus on the importance of palm oil business trends and issues i.e. market price and market development. It provides great opportunities to empower yourself with the latest information and knowledge about the palm oil current issues and developments. Four prominent speakers have agreed to share their expertise. The topics of their presentation are:

“Palm Oil Price Outlook 2011/2012 – An Analysis of Palm Oil Production and Future Supply Forecast”

by Mr. Ling Ah Hong, Ganling Sdn. Bhd.

“An Indonesian Market Outlook – Perspective and Direction”by Mr. Mohamad Fadhil Hasan Ph.D., GAPKI, Indonesia.

“An Update on Issues before FOSFA’s Committees”by Mr. Stuart Logan, FOSFA International, UK.

“Hedging Crude Palm Oil with Options” by Mr. Jeffrey Tan Seng Hui, General Manager, Product & Market Development, Bursa Malaysia Derivatives Berhad.

For more details kindly call PORAM or login to www.poram.org.my.

The Palm Oil RefinersAssociation of Malaysia (PORAM)801C/802A, Block B Executive SuitesKelana Business Centre97, Jalan SS7/2, 47301 Kelana JayaSelangor Darul Ehsan, Malaysia.Tel: 603-7492 0006 Fax: 603-7492 0128 E-mail: [email protected] / [email protected]: Susila / Fatimah

Continued on page 12

AnnualForumFriday, 14th October 2011

Sunway Resort Hotel & SpaBandar Sunway, Selangor

MPOC FORTUNE •  11

Moving MPO Market Ahead in the UAE

Page 12: Palm Oil Fortune Magazine

MPOCOffices

WorldwideMalaysian Palm Oil Council (MPOC)2nd Floor Wisma Sawit Lot 6, SS 6, Jalan Perbandaran47301 Kelana Jaya, SelangorTel: 603-7806 4097Fax: 603-7806 2272www.mpoc.org.my

American Palm Oil Council 1010 Wisconsin Av, Suite 307Washington DC 20007Tel: +1 (202) 333 0661Fax: +1 (202) 333 0331www.americanpalmoil.comE-mail: [email protected]: Mohd Salleh Kassim

MPOC Africa Regional Office5 Nollsworth Crescent, Nollsworth ParkLa Lucia Ridge Office Estate,La Lucia 4051, KwaZulu-Natal, South AfricaTel: +27 (31) 5666 171Fax: +27 (31) 5666 170E-mail: [email protected] Address:P.O.Box 1591M.E.C.C. 4301, South AfricaContact: Uthaya Kumar

MPOC Bangladesh62-63 Motijheel Commercial Area,7th Floor, Amin Court Building,Dhaka, BangladeshTel: +88 (02) 9571 216Fax: +88 (02) 9551 836E-mail: [email protected]: Fakhrul Alam

MPOC ShanghaiShanghai Westgate Mall Co. Ltd.Room 1610B, 1038 Nanjing Rd. (w)Shanghai 200041, P. R. ChinaTel: +86 (21) 6218 2085 / 6218 2513Fax: +86 (21) 6218 1125E-mail: [email protected]: Teah Yau Kun

MPOC Pakistan11 – 3rd Floor, Leeds CentreMain Boulevard Gulberg, 111 Lahore, PakistanTel: +92 (42) 3571 6600 / 3571 6601Fax: +92 (42) 3571 6602E-mail: [email protected]: Faisal Iqbal

MPOC India S-4, New Mahavir Building, Cumballa Hill Road Kemps Corner, Mumbai 400 036Tel: +91 (22) 6655 0755 / 6655 0756Fax: +91 (22) 6655 0757E-mail: [email protected]: Bhavna Shah

MPOC Europe Regional Office31 Avenue Emile Vendervelde1200 Brussels BelgiumTel: +32 (2) 7748 860Fax: +32 (2) 7794 371E-mail: [email protected]: Zainuddin Hassan

MPOC MoscowMoscow, 4th Dobrininskiy side-street,8 BC 'Dobrinya', 1st floor, Office R00-126Tel : +790 963 520 40Email : [email protected]: Aleksey Udovenko

MPOC Cairo3 Gamal E1-Din Afify Street, Nasir CityZone No.6, 11371 Cairo, EgyptTel: +20 (2) 2273 8108Fax +20 (2) 2273 8106E-mail: [email protected]: Kamal Azmi

MPOC IstanbulGuzel Konutlar SitesiDilek Apartment Daire 3Balmumcu, Besiktas - Istanbul, TurkeyTel: +90 (212) 2668234Fax +90 (212) 2668236E-mail: [email protected]: Norhaznita Husin

from Malaysia. The volume appreciated by around 100% compared with the previous year. For the first five months of this year, imports of Malaysian palm oil into the UAE were even better, at 176,063 MT or 20,700 MT more than the five months of 2010.

This was also supported by the price advantage of Malaysian palm oil compared with Indonesian palm oil, the export of which

faces a tax that came to more than 20% in the first half of 2011. Imports of palm oil are expected to increase further in the second half of the year, provided its price maintains above RM3,000 and the political situation in Middle East region maintains as it now or improves. Known to be of good quality in this country, Malaysian palm oil is in a position to expand its market in the region and there is the promise of an even greater success for Malaysian palm oil in the Middle East as a whole. Mohd Suhaili

MARKETInsightsIns g

Continued from page 11

Moving MPO Market Ahead in the UAE