KUALA LUMPUR, March 24 ― Malaysian buyers are ramping up imports of Indonesian palm oil as local supply battles to recover from the lingering impact of last year’s crop-damaging El Nino weather pattern.

Traders said world number two producer Malaysia was set to boost imports of palm oil and related products from top grower Indonesia by about 20,000 tonnes in March from typical monthly volumes of around 40-50,000 tonnes.

The two countries churn out nearly 90 per cent of the world’s palm oil, used to make products ranging from cooking oil and chocolate to soap and cosmetics.

Some traders said shipments to Malaysia would likely remain at higher levels in April as they expect Indonesia to cut its export taxes on palm to around US$3 per tonne from US$18 currently. Jakarta sets the tax rate each month.

"Imports from Indonesia could reach 60-70,000 tonnes (again) next month, if the new tax kicks in,” said one trader, declining to be identified as he was not authorised to speak with media.

El Nino often brings scorching heat across Southeast Asia that hurts palm’s fresh fruit yields. Indonesia’s trees are typically younger than Malaysia’s, however, so its crop can be more resilient and quicker to recover.

Benchmark palm oil prices were trading at over four-year highs in early January. Though they have since eased by around 10 per cent to RM2,760 per tonne, that is still way above levels seen at this time in 2016.

But further down the line, production is set to pick up again. Leading analysts have forecast a recovery in output by the second half of the year, driving down prices to around RM2,500 per tonne. ― Reuters