China Demand for Palm Oil to Pick Up

YOGYAKARTA: China will order more palm oil cargoes from July onwards to stock up for the festivals starting from September, southeast Asian exporters and Chinese traders said yesterday. Palm oil imports by the world’s No. 2 vegetable oils buyer will show only modest growth thanks to a high soyabean crush, although China’s trade freeze on Argentine soyaoil may give an upside to palm oil, they said. China tends to build up stocks two to three months ahead of festivals and this year the Mid-Autumn festival falls on the third week of September, while the National Day holiday is stretched over the first week of October. It gets the bulk of its palm oil needs from Malaysia, the second largest palm oil producer in the world, although imports are increasingly coming from top supplier Indonesia.

“Demand is not in dire straits,” a Malaysian trader said on the sidelines of an industry conference in this Indonesian city. But stocking up for festivals in July could see the palm oil futures recoup some losses and comes at a time when output, particularly in Malaysia, recovers after months of prolonged yield stress. “I suspect the Chinese are waiting for the market to go down further, so they can come in and make a killing,” an Indonesian palm oil trader said. “My associate company in Malaysia has received many enquiries from the Chinese and they have also called us in Indonesia. They are timing their purchases very wisely.” China this week bought refined, bleached and deodorised palm olein at US$805-US$810 (RM2,632-RM2,650) a tonne, cost and freight (C&F), Malaysian and Indonesian dealers said. The product is processed into cooking oil and used for manufacturing noodles and sweets. Planters with extensive refinery businesses and estates in Malaysia and Indonesia such as Singapore’s Wilmar International as well as Malaysia’s IOI Corp and Kuala Lumpur Kepong trade regularly with China. However, traders said India’s palm oil imports ahead of its festival season will tumble 30 per cent to 1.13 million tonnes for July-September shipments from a year ago, on a high domestic oilseed crush. India, the world’s largest consumer of vegetable oils, will mark a string of religious events, starting with the Muslim holy month of Ramadan in August and ending with the Hindu festival of Diwali in November. Last year in the July-September run up, India bought a record 1.6 million tonnes of palm oil products that consist mainly of crude palm oil with smaller quantities of refined palm olein and palm kernel oil, industry data showed. “We are not going to make much of an impact on India this year,” said an Indonesian palm oil exporter. “Although we still have market share, the Indian middle class can now afford to pay the slight premium for soyaoil since the economy is strong and there are ample soyaoil supplies that brought down the prices.” – Reuters Source : Business Times

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