KUALA LUMPUR (June 11): Chinese palm oil imports are expected to normalise and to decline to 5.95 million tonnes this year, after rising to 7.55 million tonnes in 2019 when domestic oil production was hit by a drought.
Kuala Lumpur Kepong Bhd (KLK) Business Director Ooi Liang Hin explained that 2019 was a “special year” as there was a drought in domestic oil production in the republic, which led to China importing more palm oil.
“What is also very interesting for our friends in the MPOC is Malaysia’s share of Chinese palm oil imports. If you look at the last four to five years, Malaysia’s share has been falling from about 40% to 30%,” he said during a webinar organised by Malaysian Palm Oil Council (MPOC) entitled Palm Oil in the Post Pandemic Market.
“We have to keep in mind that China mainly imports palm-olein, they don’t import crude palm oil. So a lot depends on the duty structure in Malaysia,” he added.
Ooi said that from January to April, Malaysia palm oil made up almost half of Chinese palm oil imports but KLK projects it will slip to 30%-40% this year.
Still, he pointed out while palm oil is not considered part of China’s national reserve of oils and fats, the country is likely to buy more palm oil to fill possible gaps resulting from a further drop in soybean, rapeseed oil and bean imports, should the Sino-US and Sino-Canadian relations worsen.
Furthermore, Chinese palm oil imports are likely to grow from July onwards, in line with production recoveries at the point of origin. Additionally, China has reopened its economy and demand is recovering fast.
CPO futures listed on Bursa Malaysia expiring in July are up RM8 to RM2,396 a tonne.
Source : The Edge Markets