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Malaysia palm oil traders ignore boycott threat

KUALA LUMPUR: Malaysian palm oil traders cast doubts on Monday on a threat by a palm oil consumer group to boycott Indonesian crude palm oil.

An official with the Indonesian Palm Oil Producers Association had told Reuters on Saturday an international association of crude palm oil buyers has threatened to boycott Indonesian CPO over plantation fires, which have sent clouds of choking smoke over the islands of Sumatra and Borneo.

The official would not give further details, including the name of the group threatening the action.

Traders in Malaysia said they were not taking the threat seriously.

"We read it but no one is talking about it," said a Kuala Lumpur trader.

"It doesn't make commercial sense at all. If the threat came from an environmental group, that's understandable. But this is from palm oil importers," he said.

Another trader said, "I don't understand why dealers will not buy palm oil because they object to forest fires, unless this so-called association has been pressured by environmental groups or there was something else behind it."

Indonesian government officials and environmental groups have accused plantation firms of deliberately lighting forest fires to clear land, a charge the companies deny.

The government earlier this month declared an emergency over the hundreds of fires raging out of control, causing pollution levels to rocket and posing a health threat.

Although recent rains have eased the situation, there are fears of a repeat of the 1997 environmental disaster when fires in Sumatra and the Indonesian part of Borneo blanketed large swathes of southeast Asia in choking smoke.

Indonesia is the world's second largest producer of palm oil after Malaysia, with output expected to hit 6.5 million tonnes in 2000 from 5.9 million in 1999.

Traders said that even if there was a boycott on crude palm oil, Indonesia could easily refine the oil into palm olein and sell it to major markets like India.

"It will not affect Indonesia much. They can always sell olein cheap to India," the second trader said.

He said Malaysian exports would also not benefit much from any boycott of Indonesian crude palm oil.

"We can only sell a certain amount of crude because of our refining needs, so any potential increase in exports will be minimal," he said.

Malaysia's exports of crude palm oil in 1999 were 256,518 tonnes compared with 8.54 million tonnes of refined oil.

The main markets for crude palm oil are the European Union and India. -Reuters