Malaysia’s main Palm oil market is China and India
SINGAPORE: Palm oil stocks in China probably eased 1.4 percent in end-March, from record high levels a month ago, as consumption in the world’s second-largest buyer of the commodity rose more than its imports, traders and analysts said on Thursday.
China’s palm oil imports in March jumped about 40 percent to 591,223 tonnes from February, but rising local demand meant consumers had to draw on stocks — which may have eased to 1.38 million tonnes from a record 1.4 million tonnes.
“Palm oil stocks at the end of March … declined because delivery from ports were larger than import volume during the period,” said a Chinese edible oil trader based in Guangzhou.
“Consumption of palm oil has increased gradually because of the warmer weather,” the trader added. The tropical oil tends to solidify in cold weather.
But with stocks expected to drop only slightly below record levels and prices still unattractive, it is unlikely purchases will pick up pace anytime soon, traders cautioned.
“China side is quiet. Interest is there but the price doesn’t work. Despite the fact that market has been coming off, physical price doesn’t move fast, hence buyers are all waiting,” said a trader with a Singapore-based brokerage which ships the edible oil to China.
The benchmark third-month palm oil futures contract on the Bursa Malaysia Derivatives Exchange has lost more than 5 percent so far this year, but the price spread between palm oil and its expensive rival soybean oil in the physical market has actually narrowed, hurting the cheaper oil’s price appeal.
Refined palm olein — used in cooking oil — trades at around 5,550 yuan ($900) per tonne at China’s southern port of Guangzhou, compared with 7,200 yuan for competing soybean oil.
The price spread at 1,650 yuan is considerably lower than the spread above 2,000 yuan seen late last year.
Recent bleak Chinese data has also muddied the outlook for commodities demand from the world’s second-largest economy. Growth in China’s gross domestic product unexpectedly stumbled in the first three months, triggering a selloff across commodities last week.
WEAK INDIAN DEMAND
Palm oil demand from top buyer India was also weak, with the country reporting a drop in imports for a second straight month in March. Its edible oil stockpiles fell nearly 9 percent in March to 850,000 tonnes, Mumbai-based trade body the Solvent Extractors’ Association said.
Lacklustre demand from China and India in the short term means top producers Malaysia and Indonesia may have to pin their hopes on buyers restocking ahead of Ramadan, traders said.
The holy month, which starts in July this year, typically sees higher consumption of the edible oil as Muslims break fasts with feasts in the evening. – Reuters
Source : The Star