CPO hits new highs on firm crude, China demand

19 February 2008 09:39  [Source: ICIS news]

SINGAPORE (ICIS news)--Benchmark third month crude palm oil (CPO) futures traded on Bursa Malaysia touched an all-time high on Tuesday with a rise of ringgits (M$) 152 ($47/tonne) over Friday's close to M$3,630/tonne, the exchange reported on its website.

Vegetable oil traders attributed the higher numbers to China’s harsh winter, which damaged the domestic rapeseed harvest, driving up demand for soybean imports in subsequent months.

Prices actually began to rise on Monday with third month CPO futures on Bursa Malaysia hitting a record M$3,599 at the close. 

May soybean oil futures on the electronic Chicago Board of Trade (e-CBOT) also climbed to a record high of 60.25cts/lb or $1,33/tonne in after-hours trade .

Firmer crude oil trading above $96/bbl on Monday also helped bolster vegetable oil values, which is used as an alternative energy source.

Vegetable oil derivative producers, already hard-hit by the recent bullishness in the upstream sector, had little choice but to hike their offers as they attempted to pass on the additional costs to their end-users.

“We have to raise our offers, otherwise we will be running at a loss,” the marketing official of a regional fatty alcohols manufacturer said, although he added that demand had slackened in the wake of the higher prices.

An oleochemical trader added that a correction in vegetable oil prices was necessary if industry players were to survive, and that smaller oleochemical plants would “shut [up] shop” if surging upstream values continued to squeeze their margins.

($1 = M$3.22)

By: Jeremiah Chan
+65 6780 4359

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