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Indian refiners have cancelled orders for 65,000 tonnes of crude palm oil that were due for delivery between July and September, after a sudden spike in Malaysian benchmark prices, four trade sources told Reuters.
Refiners in the world's biggest palm oil importer cancelled the orders over the past three days after Malaysian palm oil futures jumped more than 6%, allowing buyers to hedge against falling prices and lock in profits.
One Indian buyer, who runs a refinery on the west coast and cancelled shipments that had been scheduled for July, said: "There is huge volatility in the market. There were bigger profits in cancelling the crude palm oil purchased than in importing it, refining it and selling it domestically."
Indian buyers had struck the original purchase deals about a month ago at prices of between $1,000 and $1,030 a tonne, cost, insurance and freight included, after a recovery in production pushed prices down to their lowest level in more than eight months.
This week, palm oil futures jumped, driven by a rally in Chicago soyoil futures after the United States proposed raising biofuel blending mandates.
The sudden rally prompted Indian refiners to cancel the contracts at prices of between $1,050 and $1,065 a tonne, booking profits of more than $30 a tonne, according to the sources, who spoke on condition of anonymity as they were not authorised to speak to the media.
A Delhi-based trader with a global trading company said buyers had agreed to cancel the contracts by accepting a price slightly below the current market price, a decision reached by mutual agreement with sellers.
Crude palm oil for July delivery is currently being offered in India at around $1,070 a tonne, compared with $1,020 to $1,030 a month ago.
Despite the cancellations, Indian imports are expected to rise in the coming months after falling below average in recent months, which has depleted stocks, according to Sandeep Bajoria, chief executive of vegetable oil brokerage Sunvin Group.
India's palm oil imports hit a six-month high in May, driven by low inventories and the oil's price discount to rival soyoil and sunflower oil.
Indian buying gained momentum after India halved import duties on crude palm oil last month, but the recent cancellations have stalled that momentum, according to a Kuala Lumpur-based trader with a palm oil producing company.
Source: Reuters