Worsening Covid-19 Situation in Pakistan to Affect Palm Oil Imports

Pakistan has seen the corona virus cases explode since the beginning of June witnessing consecutive days of highest daily recorded cases and deaths across the country. As of June 18, the total number of corona virus cases in Pakistan exceeded 160,000, placing Pakistan on the list of top 15 countries with highest positive cases. A senior government minister in an official statement warned that if strict actions are not taken to stop this spread, the number of corona virus cases in Pakistan could reach 1.2 million by the end of July 2020.

The first positive case of the virus was detected in Pakistan on 27 February and the country started observing partial lockdown from the middle of March. Despite of the rising number of daily cases, the government lifted the lockdown restrictions on 12 May and opened the markets and many other commercial sectors for public. This decision was made to avoid an economic collapse as the lockdown was threatening livelihood of nearly one fourth of Pakistan population who are dependent on daily earnings.

Impact on Oils & Fats Import

Pakistan is a net importer of oils and fats and 90% of the country’s requirement for edible oil is being met with imports. At the end of May 2020, the total imports of oils and fats in Pakistan in Pakistan is registering a decline of 9.77% or 133, 844 MT, when compared with the same period of last year. This decline in the imports is largely attributed to the disruption in supply chain caused by the 6 weeks of lockdown which affected all areas of oil and fats trade.

Table 1: Oils & Fats Imports in Pakistan

Commodity Jan-May 2020 (MT) Jan-May 2019 (MT) Changes Volume (MT) Changes % Jan – Dec 2019
Crude Palm Oil 48,598 214,331 (165,733) (77.33) 376,233
Palm Oil 347,959 292,912 55,047 18.79 775,648
Palm Olein 780,879 745,691 35,188 4.72 1,793,803
Palm Fats 35,848 57,124 (21,276) (37.25) 129,776
Soybean oil 22,540 59,610 (37,070) (62.19) 146,499
Total 1,235,824 1,369,668 (133,844) (9.77) 3,221,959

                                                                                      Source: Shipping Agents’ Vessel Report

Keeping in view that Pakistan is heavily reliant on the imports to meet its monthly requirements, the shortfall in the imports of oils and fats was met with the local stocks which are being maintained at Port Qasim Authority and Karachi Port Trust. The local stocks at the ports are reached its highest mark of 420,240 MT at the end of February and then started decreasing consistently over the next 3 months registering a decline of 24.7% or 104,220 MT at the end of May.

Chart 1: Monthly Oils & Fats Stocks Comparison

The optimum level of stocks at local ports is approximately 300,000 MT which is the average monthly requirement of edible oil industry in Pakistan. On 15 June, the local stocks of oils and fats was reported at 296,240 MT, which is now below the average monthly requirement of the industry. It is anticipated that the arrival in the month of June will be approximately 250,000 MT, taking the first half of the year total imports to 1.485 million MT. This estimate is lower than the projection given by MPOC in its article “Outlook for Palm Oil Demand Indian Subcontinent in Q2” published on 24 April 2020, on our website. It was anticipated that the total imports of oils and fats in Pakistan will reach 1.6 million MT by the end of June 2020. This was based on the assumption that after the removal of lockdown restrictions in the middle of May, the food and HORECA sector in Pakistan will resume its operations and the demand for oils and fats will start picking up. However, the escalating number of Covid-19 cases in the past 4 weeks has forced the government to start enforcing partial lockdown once again and it is feared that the situation will worsen in coming weeks.

Prepared by:  Faisal Iqbal

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