FocusChina Q3 palm oil imports from Malaysia to soar on festivals

11 June 2010 07:29  [Source: ICIS news]

By Serena Seng and Nurluqman Suratman

SINGAPORE (ICIS news)--Malaysia's palm oil exports to China are expected to soar in the third quarter of 2010 as food manufacturers look to shore up inventories ahead of a national festival and holidays later this year, market sources said on Friday.

Palm oil shipments to the China are likely to rise from July as the country prepares for the Mid-Autumn and National Day holidays, from 22-24 September and 1-7 October respectively, traders said.

The traditional Mid-Autumn festival is celebrated by family gatherings while National Day holidays mark the foundation of China.

Malaysia is the second largest palm oil producer in the world and supplies almost all of China’s palm oil needs, according to a major palm oil producer.

China is also the biggest importer of Malaysian palm oil, with about 60% of the country’s exports heading to the world’s second largest economy, the producer said.

Demand for palm oil in China has grown in the past two years, sources said, adding that a rise in demand for cooking oil has added to the surge.

Palm oil is used in a variety of applications such as in cosmetics and personal care products. Many processed foods also contain palm oil as an ingredient.

“Stocking up for festivals in July could see the palm oil industry recover and comes at a time when output, particularly in Malaysia is recovering after months of prolonged yield stress,” a Singapore-based trader said, referring to poor harvests in recent months.

An increase in exports of palm oil in May, boosted by demand from China, was a good indication that the trend was set to continue in the coming months, sources said.

Palm oil cargoes to China in the January-April jumped 33% to 1,377,223 tonnes from the same period a year earlier, according to statistics from the Malaysian Palm Oil Council (MPOC).

Meanwhile, overall palm oil exports in May had risen 6% to 1,362,056 tonnes, from 1,285,467 tonnes in April, the Malaysian Palm Oil Board (MPOB) said earlier.

Palm exports in April had fallen by 8% to 1,285,467 tonnes from 1,396,949 tonnes in March, while outbound palm oil shipments in February slipped 11% from a month earlier.

The recent hike in exports came amid a hike in Malaysian crude palm oil (CPO) prices due to a fall in production in the first two months of the year, sources said.

Total palm oil stockpiles, which include CPO and processed palm oil, had dropped to 1.79m tonnes in February - the lowest level reported since September 2009, MPOB said.

The average price of CPO in the January-April period of 2010 was Malaysian ringgit (M$) 2560/tonne ($780/tonne, €647/tonne), as compared to M$2042/tonne over the same period a year earlier, based on data from the MPOC.

A recent dip in CPO values could boost exports in the coming months, in tandem with rising demand from other regions, producers said.

However, there are lingering concerns that the eurozone debt crisis could potentially cripple demand from Europe, the second largest importer of palm oil from Malaysia.

Benchmark August CPO futures KPOc3 on the Bursa Malaysia Derivatives Exchange fell as much as 1.2% to M$2,402 on 3 June, a level last seen in January, traders said.

($1 = €0.83/ $1=M$3.28)

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By: Nurluqman Suratman

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