The edible oil trade’s supply chain is under heavy stress, as a result of the war in Ukraine, with prices on the rise and a subsequent food crisis on the horizon. In its latest weekly report, shipbroker Intermodal said that “the Russia-Ukraine war has dealt a triple blow to sunflower oil, palm oil, and soybean oil supplies. The halt of sunflower oil supplies from Ukraine has further squeezed export policy from Indonesia, affecting palm oil imports and it has also exacerbated crop loss concerns in South America, impacting soybean oil supplies and prices. The impact on trade flows in and out of the region is already evident in the shipping industry as ports are closed and contracts are cancelled”.
According to Intermodal’s tanker broker, Mr. Stelios Kollintzas, “the disruptions of sunflower oil exports from the Black Sea region – which accounts for 60% of world sunflower oil output and 76% of exports – have sent global vegetable oil prices to record highs. Indicatively, Russian crude sunflower oil is offered at a record price of $2,150 a ton, including cost, insurance and freight (CIF), in India for April shipments, compared with $1,767 for soya bean oil and $1720 for crude palm oil. Responding to rising domestic prices and shortages, Russia further announced an export quota on its sunflower oil in order to maintain stability.
Source: Intermodal
Obviously, all March shipments from Ukraine have in one way or another been cancelled. Ports of loading have become war zones and some of the eastern fields for sunflower crops in Ukraine have been occupied pushing farmers to flee. Though some traders have been trying to look towards Russian ports as an alternative source of SFSO, the sanctions implemented upon much of the Russian financial system by the West, have made shipments really complex”.
Mr. Kollintzas added that “in Indonesia, despite the country being the world’s biggest palm oil producer, it has struggled to fulfill its own local demand for palm oil. In order to tackle shortages and ease pressure on domestic prices, the government has imposed a policy, where palm oil producers have to sell 30 percent of their produce in the local market before they can export. That has led to delays in issuing export permits resulting in lesser supply, while on the other side, ships have been waiting to load and tankage in factories were full. Export restrictions, pertaining to COVID disruptions, record commodity prices, high bunker prices and a strong freight market in petroleum products have all been involved in supporting freight rates in the palm oil markets as well”.
“Despite the fact that the industry expected a greater rush in soya bean oil after the invasion, this wasn’t the case since countries have looked to domestic alternatives so far. Nevertheless, reduction woes in top soybean oil exporter Argentina have caused enough stress for traders of both the vegetable oil and raw soybeans. The cost of soya bean oil, the second most consumed oil in India after palm, has surged about 30% this year. Ukraine was expected to export around 6.7M tonnes of sunflower oil in 2021/22 season – mostly to Europe, India and China but also to Africa, Middle East and Turkey. Such a supply crunch is enough to hit all three major edible oil markets and even cause a threat to Global food Security”, Intermodal’s analyst concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
