Oil crushing plants in Ukraine may stop their work due to attacks on energy infrastructure – analysts
Ukrainian sunflower oil producers may have to halt their operations if Russia continues its shelling of Ukraine's energy infrastructure, which is already in a critical state following the spring attacks by Russia, according to the Pusk analytical cooperative, established within the framework of the Ukrainian Agrarian Council (UAC).
"In April, Ukraine exported 46,000 tonnes of sunflower seeds, with Romania and Bulgaria being the main buyers. Sunflower seeds are now in very short supply in Ukraine, and sunflower oil may face certain shortages in May and June. However, this scarcity may not lead to price increases, as global markets are witnessing a decline in prices for vegetable oils, including both soybean and palm oil. Another influencing factor on the market is the Russian attacks on energy infrastructure. Most crushing plants operate on electricity. While almost all crushers have diesel generators, switching to them is impractical due to the rising cost of production," said the analysts.
In their view, if Russian shelling of energy facilities continues, some refineries may cease operations due to electricity shortages.
"In a critical situation, the government will prioritize supplying electricity to households rather than businesses," said the Pusk experts.
However, they acknowledge that a multitude of factors in the sunflower and vegetable oil market will contribute to price reductions.
"At present, the gross margin in processing either generates zero profit or a very small profit – around $10-15 per tonne. Clearly, several factors favor further declines in sunflower prices. The peak price for oilseeds was already reached in January, considering exchange rates. The limit to which conditional sunflower prices can decrease is UAH 15,300-15,500 per tonne, although this week, refineries are offering prices of UAH 16,600 per tonne. We need to monitor vegetable oil prices: as soon as they start decreasing, sunflower prices will follow suit," predicted the experts.