Edible oil crisis: Traders blame S Alam halting imports, incur 15% loss due to hike in int’l market

Soybean market traders in Bangladesh have blamed the price hike in the international market and the halt in imports by S Alam for the shortage of soybean oil in the local market.

According to import data and traders, S Alam's market share in importing crude soybean oil is between 20% and 28%, and the company has not imported any soybean oil since July 2024.

In July 2024, a total of 79,075 tonnes of crude soybean oil were imported into Bangladesh, with S Alam importing 18,900 tonnes, or around 24% of the total import. 

In comparison, S Alam imported 28% of the total in July of the previous year. 

After importing crude oil, businesspeople sell it to other companies, refine it, and also sell it in bottled form on the retail market.

Traders also noted that the price of edible oil has increased by around 25% recently in the international market. As a result, if they sell the oil in the local market, they are incurring a loss of at least 15%, as the government has capped the prices of bottled soybean oil.

The companies also stated that, although the government has reduced the VAT on edible oil by 10% on 17 October 2024, they are still losing 15% of the original price compared to the international market.

Meanwhile, imports slightly fell this year compared to July-November of last year. 

From July to November 2023, the total import was 191,014 tonnes, whereas it dropped to 170,563 tonnes in 2024, marking a decrease of around 10%.

Moreover, following the fall of the Sheikh Hasina-led Awami League government after the July uprising, some businessmen have gone into hiding. 

A top businessman, speaking on the condition of anonymity, told The Business Standard that they were facing problems with "single-party exposure" when opening a Letter of Credit (LC). To import a consignment, they need about Tk100 crore, which banks are not willing to provide on their own terms. Additionally, some banks are asking for an extra Tk0.50 to Tk1 above the real market price of dollars, which is also impacting prices.

They warned that the crisis will deepen if the government does not reconsider the pricing. 

To survive and meet market demand, some businesspeople are supplying bottled soybean oil alongside other commodities.

Around nine to ten conglomerates, including S Alam Group, TK Group, City Group, Bashundhara Group and Meghna Group, have controlled the lion's share of the soybean oil market.

However, while Abul Khair Group has started importing, it has not yet gained momentum to replace S Alam Group.

Biswajit Saha, director of Corporate Affairs at City Group, told TBS on 5 December that an edible oil importer confirmed a 40% global price hike. 

"We proposed increasing the price of soybean oil," he said. 

Meghna Group's General Manager of Marketing Nasir Uddin told TBS, "The price was set during the Awami League government when the price of soybean oil per tonne was around $900. It is now $1,150-$1,200. Similarly, the price of palm oil has also increased. As a result, selling bottled oil is incurring losses. However, we are continuing to supply."

A shortage of bottled soybean oil has been observed nationwide, including the capital. 

In response to this situation, the commerce adviser convened a meeting today (8 December) with mill owners to address the issue. 

The mill owners highlighted a significant rise in the international market and urged for domestic prices to align with global market rates.

However, the meeting ended without any decision, said a commerce ministry official, wishing anonymity. 

A follow-up meeting between Bangladesh Trade and Tariff Commission officials and the mill owners is scheduled for tomorrow morning.

Since September, mill owners have been urging the government to increase the price of edible oil. 

Amidst high inflation, rather than raising prices, the government has sought to appease the mills by offering duty concessions. 

In October, import duties on soybean and palm oil were reduced in two phases.