Muted Asia demand for palm oil on buyers’ defaults

01 September 2008 08:24  [Source: ICIS news]

SINGAPORE (ICIS news)--Demand for crude palm oil tonnage has been muted as Asian buyers, particularly Chinese and Indian, defaulted on their letters of credit for up to 800,000 tonnes of the commodity, industry sources said on Monday.

 

Brokers said that there was a dearth of demand from Chinese buyers due to the defaults and high inventories. Indian buyers on the other hand were cancelling their earlier purchases. Some were asking for deferments which helped stabilise the market slightly.

 

“It’s really bad now and the news of defaults have been reported all over the place. Maybe things will pick up in October. But we doubt so as the mess has to be cleared up first,” a source said.

 

However, demand from other destinations could lend some support to the bearish market, players said.

 

Enquiries to ship crude palm oil (CPO) to Western destinations were seen in September. For example, 30,000-50,000 tonnes from the Straits of Malacca to Rotterdam; 6,000-10,000 tonnes from Straits to US Gulf; 15,000 tonnes from Straits to Dessa; 6,000 tonnes from Straits to Liverpool and 20,000 tonnes from Straits to Kaliningrad.

 

Chinese demand for the commodity had been healthy in early July ahead of the Beijing Olympic Games. Demand for August cargoes had been especially good, with charterers seen seeking vessels to load cargoes.

 

As a result, rates in July had been firmer, with palm oil freight rates for 10,000-15,000 tonne cargoes from the Straits-mid China seen at $44-46/tonne and $48-50/tonne for the journey to North China. The rates have since fallen to $35-36/tonne and $39-40/tonne respectively.

 

Rates for the voyage to South China had also fallen by $4/tonne to $29-30/tonne.

 

Likewise, freight rates to west coast India also fell by a similar amount to at $38-39/tonne, and $2/tonne to $34-35/tonne to the east coast of India for 12,000 tonne cargoes. Pakistan rates were also down $4/tonne to $38-39/tonne. 

 

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By: Desmond Chia
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