Cooking oil crisis deepens as Pwani Oil halts production over lack of raw materials

Countries such as Indonesia are said to have suspended exports of palm oil. [iStockphoto]

The cost of cooking oil is expected to further go up after one of the country’s largest edible oil manufacturers temporarily shut its operations due to lack of crucial raw materials.

Pwani Oil announced on Monday that it would stop production, adding to the current crisis in which prices of cooking oil have gone beyond the reach of most Kenyans.

Cooking oil is one of the items that has burrowed the deepest hole in the pockets of Kenyans. In various supermarkets in Nairobi, five litres of cooking oil retails at an average of Sh2,150 compared to around Sh1,500 last month.

Before prices of cooking oil began rising, a five-litre jar of Fresh Fri cooking oil was retailing at below Sh1,000 in early 2020.

Currently, five litres of Fresh Fri cooking oil retails at Sh2,014, more than double its price in 2020. Brands like Captain Cook and Rinsun are retailing at Sh2,580 and Sh2,530 respectively.

The situation is expected to worsen with the closure of Pwani Oil refinery, known for its Fresh Fri and Salit cooking oil brands. The company has also blamed the situation on a shortage of US dollars to purchase palm oil, which is the main raw material for manufacturing cooking oil.

A tonne of palm oil in the global market is currently going for $6,500 (Sh759,200), an increase of over 50 per cent compared to $4,000 (Sh467,200) in June last year.

In a statement, Pwani Oil Commercial Director Rajul Malde said global supply chains have been severely impacted by the Russia-Ukraine conflict.

Additionally, some countries such as Indonesia, where Kenya imports close to half of its palm, are said to have suspended exports of palm oil.

Mr Malde said manufacturers in Kenya have not been spared either as they are still recovering from the Covid-19 pandemic aftershock.

“Locally, the situation has been compounded by challenges faced by manufacturers in accessing US dollars used in paying for imports of crucial raw materials,” he said in a statement.

“Given the prevailing challenges, Pwani Oil has temporarily halted operations at its refinery in Kilifi as we work to resolve the problem.”

On Monday, the dollar was exchanging at an average Sh116.80. However, the Kenya Association of Manufacturers recently said some of its members have paid up to Sh120.

“We, however, wish to assure our customers, employees, suppliers, partners and other stakeholders that this is a temporary measure and that the business remains in operation and our products available in retail outlets,” Mr Malde said.

A few weeks ago, Indonesia lifted a ban on palm oil that contributed to the skyrocketing prices as manufacturers are still required to meet domestic supply before exporting.

However, Malaysia, where Kenya is documented to import from, did not institute any ban.

“Imports of crude palm oil from Malaysia accounted for 66.6 per cent of total imports from this source in 2021 and largely contributed to the marked increase in imports from Sh26.8 billion in 2020 to Sh62.4 billion in 2021,” the 2022 Economic Survey said.

Kenya as well exports palm oil, which, according to the report, was one of the goods destined for Uganda in 2021. “The value of exports to Uganda increased from Sh72.2 billion in 2020 to Sh91.7 billion in 2021, largely driven by an increase in domestic exports of cement clinkers, palm oil, flat-rolled products of iron and non-alloy steel and; re-exports of machine tools for drilling, boring, sinking, milling, threading or tapping,” the survey said.

Indonesia is the largest producer of crude palm oil followed by Malaysia. Before the Russia-Ukraine crisis, manufacturers could access sunflower oil, another raw material for cooking oil.

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