Palm Oil Market Potential in Pakistan Heading Towards 2022

Pakistan is home to the world’s fifth most populous country, with a population exceeding 225.2 million and its middle-class citizens continue to grow. The country’s middle-class section is estimated at around 35% of the total population. The vast population and growing middle-class households have translated to higher disposable income. Along with this development, the food industry is one of the most lucrative sectors. Palm oil is the main component in the food processing industries in Pakistan. 

The developing growth in the food market that includes Vanaspati, fast food and snack industry has resulted to more opportunities for the usage of palm oil and its fractions. Palm oil is also the preferred choice in the confectionary, baking and frying industry that has also led to the increased imports of palm oil based packed products and specialty fats.

As the world’s economy is recovering from the global pandemic, Pakistan’s vegetable oils market has managed to maintain its momentum as imports continue to flood the local market. This is especially true as the food industry including the catering sector has been lifted hence more imports of vegetable oils coming into Pakistan.

Domestic Oilseeds, Oils and Fats Scenario in Pakistan

Until October 2021, Pakistan has recorded a total volume of 3,015,994 MT oils and fats imports which is 256,444MT or 9.29% higher when compared with the same period of 2020, as shown in Table 1. Imports of crude palm oil are registering a decline of 57.01% whereas the imports of RBD palm oil have jumped 47.78%. The import of soybean oil is showing a decrease of 12.07%.

Vanaspati industry in Pakistan, which is the main user of palm oil and its fractions in the country has imported large volumes of RBD palm oil from Indonesia which was being sold at a discount as compared to Malaysian or Indonesian CPO. This has been the main reason behind the decline in the imports of CPO and significant increase in the imports of RBD palm oil, which is a suitable feedstock for Vanaspati. The overall increase in palm oil imports is attributed to the increased uptake in 2021 after resumption of economic activities and replenishing local stocks which were operating at a minimum level till end of second quarter.

Table 1: Total Imports of Oils and Fats

Commodity Jan-Oct 2021 (MT) Jan-Oct 2020 (MT) Changes Volume (MT) Changes %
Crude Palm Oil 56,499 131,409 (74,910) (57.01)
Palm Oil 1,175,366 795,373 379,993 47.78
Palm Olein 1,590,474 1,652,480 (62,006) (3.75)
Palm Fats 113,305 108,590 4,715 4.34
Soybean oil 80,350 71,698 8,652 12.07
Total 3,015,994 2,759,550 256,444 9.29

Source: Shipping Agents’ Vessel Report / MPOB

In terms of oilseeds, the year-to-date total import of oilseeds has registered a volume of 3,053,500MT at the end of October 2021, which is 605,424MT or 24.73% higher when compared with the same period of last year, as reflected in Table 2. This significant increase is attributed to the import of high volumes of soybeans till the third half of 2021. High crushing margins and increase in the update of soymeal from the feed industry prompted the high crushing activity. The increased soybean import has also impacted the import of soybean oil which has registered a decline of 12%.

Table 2: Total Imports of Oilseeds

Commodity Jan-Oct 2021 (MT) Jan-Oct 2020 (MT) Changes Volume (MT) Changes %
Canola 697,500 712,320 -14,820 (2.08)
Soybean 2,356,000 1,735,756 620,244 35.73
Total 3,053,500 2,448,076 605,424 24.73

            Source: Shipping Agents’ Vessel Report

MPO Imports Scenario in Pakistan

Malaysian palm oil exports into Pakistan has been on the decreasing trend since the start of 2021. At the end of October 2021, MPO exports recorded a significant decrease by almost 40% from 889,084 MT to only 536,144 MT. The decline in the Malaysian palm oil is attributed to a combination of factors. Apart from recovery from the global pandemic, palm oil imports to Pakistan had been lower during May-July 2021. Imports started to pick up only from August-October as the Pakistani buyers adopted a ‘wait-and-see’ approach.

Source: MPOB

At the same time, Indonesian suppliers have been aggressive in their approach by offering higher than usual discount (up to USD40 discount per tonne) on refined palm oil fractions from Indonesia. It has been reported that new players from Indonesia have entered the market. Regular Malaysian companies who would regularly offer cargos to Pakistan have not been active in 2021 due to shortage of CPO and their commitments in other markets.

Table 3: Total Imports of Oils and Fats

Type of Products Jan-Oct 2021 (MT) Jan-Oct 2020 (MT) Changes Volume (MT) Changes % Jan-Dec 2020 (MT)
CO/DPL 152,857 127,710 25,147 19.69 156,701
RBD PL 258,091 542,081 (283,990) (52.39) 581,105
CPO 36,999 88,410 (51,411) (58.15) 123,008
RBD PO 56,729 86,232 (29,503) (34.21) 91,013
PAO 15,925 23,599 (7,674) (32.52) 27,884
Others 15,543 21,051 (5,508) (26.17) 24,012
Total 536,144 889,084 (352,940) (39.70) 1,003,723

Source: MPOB

Outlook for Palm Oil

After maintaining the momentum of oils and fats imports especially palm oil, the edible oils stocks in Pakistan is reportedly slightly over monthly average and is likely to stay until the end of 2021. Palm oil import is anticipated to take a slight dip mainly due to the high prices of palm oil. Total imports of palm oil are forecast to reach 3.5 million MT by the end of 2021 representing an increase between 6-7%. The opening of HORECA sector means more demand will be created for palm oil.

Packed and finished products are in demand as can be seen in the increase of cooking oil exported from Malaysia to Pakistan. Cooking oil from Malaysia recorded an increase of almost 20% during Jan-Oct 2021 period as compared to the same period last year. Strong forecast is anticipated for the first quarter of 2022 as local buyers will stock up in preparation of Ramadhan that will start in April 2022. It is forecast that palm oil demand will increase by 4-5% during the first quarter of 2022.

Prepared by Azriyah Azian

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