India’s palm oil demand unlikely to recover until Q1 2021: analyst

India’s palm oil demand will only recover in the first quarter of 2021 at the earliest, while palm oil prices are expected to remain low until the end of the current calendar year, Dorab Mistry, an analyst with Godrej International, said Friday.

The rebound in India’s purchases through May and June will tail off soon, he said, as the recovery was largely driven by filling pipeline stocks, which slumped to near-record lows due to the Covid-19 lockdown.

“By the end of 2020, Indian palm oil demand will be between 85-90% of the pre-Covid levels. 100% will be only reached in the first or even in second quarter of 2021,” Mistry told a webinar organised by the Indian Solvent Extractors' Association (SEA).

At the same time, the palm oil analyst said that the current recovery in commodity prices is partially due to the huge stimulus that has been administered to the world economy in virtually every country.

“After the middle of July, we will see once again recessionary tendencies, economic shrinkage and a very tough environment for commodities and for the world economy,” Mistry said.

Mistry, a world authority on palm oil, said commodities are in for a very rough time with “cruel prices” expected, which means that price levels are expected to fall very close to the cost of production, which he pegged at MYR1,500-1,800/mt ($350-$420/mt) based on Malaysian origin.

Palm oil prices will remain under pressure until the fourth quarter of 2020 to support demand, with the outlook still “fragile” amid growing signs of further economic contraction due to a high possibility of a second wave of the Covid-19 infections.

“If we push up prices unnecessarily, we are going to destroy demand and we are going to create problems in October, November, and December,” Mistry said.

“I am looking forward to high commodity prices from the second quarter of 2021, but until then... I am afraid we have to live with low prices.”

With edible oil demand destroyed by global lockdown measures, prices for the tropical oil have plunged 37% since the start of the year to hit a low of MYR1,946/mt ($449.22/mt) on May 6.

Since then, futures have rebounded 22% supported by the jump in demand noted between May and June.