China’s palm oil demand to drop as cheaper alternatives rise: analysts
China is expected to continue increasing its soyoil imports which will limit demand for palm oil
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[KUALA LUMPUR] China’s demand for palm oil is expected to further decline this year as the country shifts to cheaper canola and soybean alternatives, palm oil traders and analysts said on Monday (Feb 9).
China’s recent trade deal with Canada has enabled imports of cheaper canola oil along with increased purchases of Australian canola, and coupled with higher soybean imports and crushing activity, will significantly impact palm oil imports this year, said Anilkumar Bagani, commodity research head at Mumbai-based brokerage Sunvin Group.
Chinese demand has been rising due to the festive season according to a palm oil analyst from a major Malaysian planter, though imports will not be as high as before as they have other options like canola and soybean.
The analyst added that Chinese demand has been reduced to core demand only due to the large disparity between contract prices.
“I think the Chinese, in a way, they are not really that desperate because they have a lot of options as compared to India. ... The Chinese side are still pretty much looking at the Dalian prices,” the analyst told Reuters ahead of an industry conference in Kuala Lumpur.
The analyst added that competitive prices from Indonesian palm oil has also affected Malaysia’s palm oil exports to China.
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The Malaysian Palm Oil Board (MPOB) reported that exports to China fell 35.7 per cent last year.
However, Malaysia could take advantage of Indonesia’s levy hike plan, scheduled in March, the analyst said.
An Indonesian analyst expects palm oil prices to slightly decline this year as strong palm output and strong soyoil output weighed down on the market.
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Despite a decline in palm prices, China is expected to continue increasing its soyoil imports which will limit demand for palm oil, the Indonesian analyst said. REUTERS
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