Pakistan cannot offset lost Indian demand for Malaysia's palm oil: analysts

A hike in Pakistan’s palm oil imports from Malaysia will only partially offset loses expected after India's decision to stop buying the commodity following a diplomatic dispute, market sources have told Agricensus.

Pakistan’s Prime Minister Imran Khan said on Tuesday that the country will do its best to compensate for the loss in Indian demand after a fallout between New Delhi and Kuala Lumpur.

“We noticed that India threatened Malaysia for supporting the Kashmir cause. They [India] threatened Malaysia to cut their palm oil imports. Pakistan will do its best to compensate for that,” Khan said at a press conference.

Pakistan has already followed through on buying the commodity from mainly-Muslim Malaysia, sourcing 141,500 mt of its palm oil in January – some 50% more than the monthly average.


If India follows through with its threat, the world’s second-largest palm oil exporter could lose up to 4.5 million mt of exports annually – equivalent to the volume India imported in 2018/19, according to official customs data.

Pakistan – the world’s third-largest vegoil importer – imported only 3.3 million mt of palm oil in 2018/19, 34% of which came from Malaysia, the data showed.

“[Pakistan] has recently switched to Malaysia for palm oil due to the competitive offerings but they still cannot increase the aggregate palm oil purchases much,” Anilkumar Bagani, research head at Mumbai-based vegoil broker Sunvin Group said.

“I think there is insufficient demand in Pakistan to absorb such a massive volume of RBD palm olein,” Sathia Varqa, owner and co-founder at Palm Oil Analytics, told Agricensus.

Pakistan annually consumes 4.5 million mt of vegoils, while India – the second most populous nation in the world – consumes 24 million mt.

“Total population of Pakistan is 200 million and the maximum they can eat is 20 kilos [per capita]. So, the total they can import is 4 million mt, but this is what India imports in three months,” a vegoil broker said.

Pakistan has also expanded its soybean crush industry in recent years, further dampening demand for palm oil imports.

“Palm oil will face strong competition from soybean oil for market share, particularly at the current low palm discount to soyoil,” Varqa added.


Pakistan could lower its import duties on Malaysian origin in a bid to boost its imports and force importers to switch away from Indonesian volumes.

“If Malaysia and Pakistan work out at least a $15-20/mt duty differential for Malaysian origin, it will negate [some of] the impact,” a Malaysian palm oil broker said.

However, the success of the scheme is not guaranteed, with Pakistan’s government looking to plug a sizeable hole in its budget that forced it to turn to the IMF for $1 billion of assistance last year.

“Pakistan traditionally buys from Indonesia and as the Pakistani government gets good revenue from vegoil import taxes, they may not [be able to] afford to reduce taxes to increase palm oil purchases from Malaysia,” Anilkumar Bagani added.