India's palm oil demand surges as price falls below soybean oil

India, the largest importer of palm oil globally, has seen a surge in palm oil demand in April after five months of slow activity, due to lower prices and favorable import margins compared to soybean oil, market sources told Platts, part of S&P Global Commodity Insights.

Palm oil is gaining market share in India, as buyers favor it over soybean oil, with crude palm oil priced lower than soybean oil.

"Palm oil price is below soybean oil currently, and the import margin for palm oil has turned positive. However, the import margins for competitive products like olein, sunflower oil and soybean oil remain negative. So, Indian buyers are inclined to purchase more palm oil," a market source said.

Another source noted: "Indian buyers are quite sensitive to prices and margins. With current favorable conditions, they will definitely look to restock palm oil, especially since purchases were low in previous months."

Previously, Indian importers had reduced palm oil purchases when it was more expensive than other vegetable oils in the global market.

India's palm oil imports increased to 424,599 mt in March, a 13.7% rise from February's 373,549 mt, although still 38% lower than March 2024, according to data from the Solvents Extractors' Association of India.

Palm oil gains price advantage

Palm oil's fall in price is attributed to increased production and stockpiles in Malaysia, coupled with recent market uncertainties stemming from US tariffs concerns, which have driven prices down in April.

Benchmark third-month palm oil futures on Bursa Malaysia commodity exchange dropped 10.55% since the start of the month to MR4,035/mt ($919.55/mt) at the close of trading April 23.

Currently, palm oil is approximately $50/mt cheaper than soybean oil, reversing the trend from March 2025, when soybean oil was $70-$100/mt cheaper.

Palm oil competes with other soft oils for a share of the global vegetable oils market.

In physical markets, CFR West Coast India crude palm oil offers for May-loading cargoes were $1,065/mt on April 23, while June-loading cargoes were priced $15/mt lower.

Platts assessed crude palm oil CFR West Coast India price at $1,055/mt on April 23, a 10.21% decrease from the start of the month.

Production season takes off

On the supply side, the production uptick at the world's second-largest palm oil producer, Malaysia, is expected to further pressure prices as production levels recover.

Malaysia's Southern Peninsular Palm Oil Millers Association showed a 7.69% increase in yield, a 0.27% improvement in oil extraction rate, and a 9.11% rise in overall palm oil production for the period April 1-20 compared to the same period in March.

Sources indicate that palm oil supply from the largest exporter, Indonesia, is also strong.

"Currently, Indonesia is exporting the majority of palm oil to India," a market source said.

Indonesia and Malaysia account for 85% of the world's palm oil supply.

China's demand remains slow

In contrast, demand from China, the second-largest palm oil buyer after India, remains slow.

"China's vegetable oil stocks are low, and they will continue to restock to meet their fixed demand," a source said.

Another source added that demand from China is very slow, as they are only buying what they need.