Ukrainian companies that extensively use imported raw materials and are export-oriented are afraid of being sqeezed out of the game
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| PHÎÒÎ: SHUTTERSTOCK |
The import of crude palm oil is directly related to the subsequent re-export of this product and processed by-products to CIS countries, mainly to Russia, Kazakhstan, Moldova, Belarus and Armenia.
The industry association assesses the annual capacity of the domestic market of palm oil at 100,000-150,000 t. “These volumes are sufficient to meet the needs of the major consumers of these products – the bakery, confectionery, dairy, fat food and cosmetics industries,” said Ukroliyaprom’s chief Stepan Kapshuk.
The optimistic plans of the Agriculture Ministry in view of the growing export of palm oil from Ukraine up to 150,000 t have been jeopardized by the actions of Russia that recently announced plans to reduce dependence on Ukraine as a main palm oil supplier. Moscow demands introduction of changes to the rules defining the countries of origin within the framework of CIS free trade agreements. The Russians claim that the processing (refining, deodorization etc) of palm oil is insufficient to give Ukrainian importers grounds to indicate on the packaging that Ukraine is the country of origin of this product. In the meantime, export of food products is impossible without a CT-1 certificate of origin.
The ammendments actually impose a ban on the tax-free delivery of palm oil products processed by Ukrainian enterprises to Russia and other CIS markets, says Kapshuk.
In addition, the northern neighbor is seeking to limit the use of raw materials from other countries in the production of special fats and margarine down to 50% of the price of the finished product.
Russia’s Ministry of Agriculture protested against the large quantities of palm oil, that accounted for 5.4% of all agricultural imports from Ukraine in 2009. For comparison, cheese and cottage cheese account for 17.5%, chocolate 17.3%, processed fruits and vegetables (6%) and alcoholic and non-alcoholic beverages (19.2%).
Despite the repeated protests of Ukraine Russia’s initiative found the backing of a majority of votes at the last meeting of the working group of CIS countries. The losses will be quite significant: the price of crude palm oil imported from Malaysia is about US $700/t and as a result of industrial processing oil rises in price by US $120- $200/t and special fats and margarine – by US $150-$200/t.
A number of Ukrainian palm oil processors will have to look for new markets or/and diversify capacities. However, experts say that given the current technologies used in the production of confectionery and dairy products it is almost impossible to do without palm oil in the food industry.
Kapshuk said at the moment the capacities of domestic enterprises allow for processing nearly 1.5 million tons of palm oil a year. Approximately ten plants are engaged in the production of special fats, margarine, olein and stearin from tropical oils. Besides having access to the sea, Ukraine’s main advantage is specialized enterprises engaged in the trans-shipment of palm oil operating in the ports of Odesa and Illichivsk.
Meanwhile, Russia cannot directly import this product in large volumes due to serious difficulties. As Commercial Director of the Russian company Solnechnye Produkty Vyacheslav Kitaichik said, the only port that can carry out trans-shipment of tropical oils is Taman. “Russia doesn’t have any other specialized ports like this and it also does not have the capacity to store large amounts of tropical oils in its terminals,” he pointed out.
At the same time, Russian manufacturers in the oil and fats industry hope to resolve this problem either by creating simplified working conditions in the trans-shipment of tropical oils through specialized terminals in Ukraine or setting up a new joint venture in Ukraine. It looks like Russians are interested in either variant to lessen the presense of Ukrainian companies.
The AAA consulting agency said the average monthly export of palm oil and its by-products from Ukraine fell by nearly half from 11,000-12,000 t to 6,000-7,000 t since March. All that aside, Ukrainian companies are not losing hope to strengthen positions on one of its largest export markets. They are currently developing new products based on palm oil, such as cocoa butter substitutes, which according to domestic technologies should be of interest to Russian confectioners.
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