West Asia crisis: Sunflower oil consumption set to fall 10% on rising prices, supply disruptions
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Indian sunflower oil consumption is expected to decline by around 10% in the current fiscal as higher prices and supply disruptions triggered by the West Asia conflict weigh on demand, according to a recent Crisil Ratings report.
The drop in volumes comes even as revenues are projected to remain flat, with higher realisations offsetting the demand slowdown. The report points to a twin impact - logistics disruptions and rising import costs. Both the factors are expected to push consumers towards cheaper alternatives such as a rice bran and soybean oil.
“Firstly, supply-chain disruptions triggered by the Middle East conflict, and secondly, higher prices resulting from the pass-through of increasing logistics costs, will likely lead consumers to switch to cheaper substitutes,” said the report.
As prices rise, demand shifts
A sharp increase in crude sunflower oil prices is at the core of the demand slowdown. “Since the West Asia conflict began, the average import price of sunflower crude oil has risen to $1,420–1,440 per tonne currently, compared with $1,275 per tonne on average for the trailing 12 months,” said Jayashree Nandakumar, director, Crisil Ratings.
She added that a weakening rupee and elevated shipping costs are further inflating the landed cost of imports.
Retail prices have already moved up to ₹170-75 per litre from around ₹150 per litre in January 2026. At the same time, competing oils are available at a discount of ₹10-20 per litre, as a consequence it is accelerating substitution.
India’s sunflower oil segment, which accounts for 12–14% of the country’s total edible oil consumption of 25–26 million tonnes annually, remains heavily dependent on imports, particularly from Ukraine and Russia.
“With the ongoing conflict in West Asia, vessels are taking longer routes, such as around the Cape of Good Hope, increasing voyage distance and transit time. Moreover, for vessels
passing through conflict-sensitive regions, war-risk insurance premiums have risen. Consequently, the landed cost of crude sunflower oil for Indian refiners has increased,” explained the report.
Margins remain stable despite the volume decline
Despite the expected volume contraction, refiners’ profitability is likely to remain stable. Operating margins are seen holding at around 4.8–5%. This is supported by inventory gains from previously procured low-cost stock and the ability to pass on price increases, albeit with a lag of 10–15 days.
An analysis of nine refiners, accounting for about 70% of the industry’s ₹36,000 crore revenue, indicates that strong balance sheets will help maintain stable credit profiles. At the same time, supply bottlenecks are tightening inventory levels.
“Refiners typically maintain raw material inventory of 30–45 days to manage supply disruptions and price volatility. However, inventory has dropped to 20–30 days amid the West Asia conflict-induced increase in prices. While it reflects supply uncertainty and slower replenishment cycles, the lower inventory position has had a marginally positive impact on near-term liquidity due to release of working capital for refiners,” said Rishi Hari, associate director, Crisil Ratings.
While lower inventory means supply uncertainty, it has also led to a temporary release of working capital, supporting near-term liquidity. However, Crisil cautions that a prolonged war causing long-term disruption could further strain supplies, complicate procurement strategies and keep prices elevated. The trajectory of the conflict and global trade flows will remain key variables for the sector going ahead.