Palm oil prices post sharp losses as coronavirus concerns mount

Author: Jackie Wong

2020/01/29

SINGAPORE (ICIS)--Palm oil prices in Malaysia posted sharp losses at closing on Tuesday following concerns over the demand outlook as the coronavirus situation in China worsens.

Crude palm oil (CPO) and palm kernel oil (PKO) closed lower at $661.12/tonne and $809.73/tonne on 28 January, the first day of trading after the market resumed in Malaysia following the Lunar New Year break, reflecting losses of 9.88% and 11.59% respectively.

According to research firm Phillip Futures, the decline was a result of mounting fears that the fast-spreading coronavirus in China will hit demand and lower exports to India amid a diplomatic spat between India and Malaysia.

The spread of the coronavirus has led of a lockdown of cities in China, and curfews and curbs in travel, which would likely lead to lower usage of edible oils in the food industry and a slowdown in Asia’s economic activity.

The bearish sentiment weighed on edible oil prices, leading to losses in the prices of palm oil and other vegetable oils.

Following a period of sustained firmness from October to December last year, palm oil prices have been weakening since January, as production estimates suggested that the drop in oil yield may not be as significant as initially feared and after the Indian government informally asked traders to halt all palm oil imports from Malaysia.

Thousands of tonnes of palm oil were said to be stranded at ports in India as importers await a clear directive from the government.

However, some players in the palm oil market expect the impact to be short term, as India relies heavily on imported edible oils to fulfill its consumption needs. Some also expect that this would only result in India turning to other palm oil sources such as Indonesia instead.

(Image: By Adriana Adinandra/SOPA Images/Shutterstock)

Focus article by Jackie Wong