SE Asia-to-China palm oil freight rates may fall on weak demand

By Muhamad Fadhil

SINGAPORE (ICIS)–Palm oil freight rates from southeast Asia to China may soften in the coming weeks amid weak demand for the vegetable oil and bearish sentiment from end-users, shipping sources said on Friday.

Freight rates are being quoted lower by at least $1-2/tonne this week to entice end-users and charterers to enter the market, they said.

“What can they do? They need to lower prices in such a bearish market. They may even make a loss at this rate,” a Singapore shipbroker said.

For the week ended 1 November, palm oil freight rates for a 10,000 tonne vessel from southeast Asia to south China were at $37-39/tonne, according to ICIS data.

For similar-sized vessels from southeast Asia to north China, the freight rates were at $45-48/tonne during the same period.

Despite the opportunity to fix cargoes at lower freight rates, most charterers remained on the sidelines amid uncertainty in the  near-term price direction of crude palm oil (CPO), the shipping sources said.

“The sentiment is very bad currently. Nobody is willing to take the risk to purchase fresh volumes of palm, especially if prices will drop further,” a southeast Asian shipping source said.

At 11:14 Singapore time, the benchmark palm oil January contract traded at the Bursa Malaysia Derivatives Exchange was at Malaysia ringgit (M$) 2,526/tonne ($792/tonne), down by M$18/tonne from the previous day.

Palm producers can expect trading activities in the spot market to pick up ahead of the Chinese New Year festival in end-January, industry sources said.

“Demand is traditionally strong during Chinese New Year. This year should be no different,” said a separate southeast Asian shipping source.

Palm oil freight rates from southeast Asia to India are also expected to soften after the Hindu festival of Diwali in early November due to weak demand, shipping sources said.

For a 10,000-tonne vessel, palm oil freight rates from southeast Asia to India were assessed at $30-34/tonne for the week ended 1 November, according to ICIS data.

China and India import palm oil from Indonesia and Malaysia, two of the world’s largest producers of the vegetable oil.

Super typhoon Haiyan is not expected to affect the near-term freight rates of palm oil, shipping sources said, citing that most vessels from Indonesia and Malaysia going to China and India are expected to avoid the typhoon path.

Typhoon Haiyan smashed into the central island of Samar, about 600 kilometres southeast of Manila early on Friday, according to media reports.

($1 = €0.74 / $1 = M$3.19)

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