Asia palm oil surges on supply concerns; oleochemicals market muted

SINGAPORE (ICIS)–Palm oil prices in Malaysia maintained a strong surge amid concerns over a sharp decline in production, making it difficult for discussions involving oleochemicals in Asia to gain traction.

On 9 December, crude palm oil (CPO) prices closed at $685.18/tonne, while palm kernel oil (PKO) prices closed at $922.23/tonne, registering week-on-week gains of $39.02/tonne and $114.99/tonne, respectively.

Palm stearin prices jumped $50/tonne in the same period, closing at $705/tonne.

As a result of the strong feedstock uptrend, fatty acids and fatty alcohols producers have been increasing their offers to cover costs.

Some suppliers have stopped offering their products altogether until raw material prices stabilise.

There have been more buying enquiries, particularly for C12-14 alcohols, as some buyers look to secure positions before palm oil prices go up further.

However, the buying indications have failed to catch up with the increase in offers so far.

Palm oil prices have been on a sharp uptrend since 2 December, supported by mounting concerns over a significant reduction in supply.

At the International Palm Oil Congress and Exhibition (PIPOC) 2019 in November, industry analyst James Fry of LMC International had said that the combination of dry weather and lower fertiliser use has affected palm oil output in Indonesia and Malaysia.

With palm oil prices suppressed by a high stock earlier in the year, some palm growers cut costs by using less fertilisers. This is expected to impact crop yield in the coming year.

Some analysts have already projected Malaysian palm oil production to drop by more than 10% in November.

Palm oil prices were also supported by a bullish soy oil market after some Chinese importers started buying soy from the US for deliveries early next year. The Chinese government has offered buyers new waivers from retaliatory tariffs imposed as a result of the US-China trade war.

The recent increase in palm oil prices happened even though export of palm oil products from Malaysia is forecast to drop in November.

Focus article by Jackie Wong

Photo: Palm oil fruits at the Nusantara VIII palm oil plantation in Bogor, Indonesia. (By Adriana Adinandra/SOPA Images/Shutterstock)

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