Ed­i­ble oil im­ports set for re­bound

Big ap­petite for moon­cakes set to re­vive de­mand for palm oil in China

China Daily (USA) - - BUSINESS - By BLOOMBERG in Kuala Lumpur

China’s ap­petite for palm oil im­ports is set to re­cover from a 25 per­cent slump in the first half as cheaper sup­plies and a ma­jor au­tumn fes­ti­val boost ed­i­ble oil de­mand.

China’s palm oil pur­chases plunged to 1.87 mil­lion met­ric tons from Jan­uary to June af­ter El Nino-weather con­di­tions squeezed sup­plies and drove prices to two-year highs. Buy­ers in China opted for soy­bean and sun­flower oil, with soy­bean im­ports ris­ing by about 3.4 mil­lion tons to 38.56 mil­lion tons, while sun­flower oil im­ports surged 23 per­cent to 470,000 tons, ac­cord­ing to Chi­nese cus­toms data.

Palm oil’s move into a bear mar­ket in July has al­ready helped it gain some of the ground lost to ri­val oils, with im­ports from Malaysia jump­ing 68 per­cent to 225,856 met­ric tons in July from June, ac­cord­ing to data from cargo sur­veyor So­ci­ete Gen­erale de Sur­veil­lance. A jump in de­mand for oil to make fried foods and sea­sonal treats like moon­cakes dur­ing the three­dayMidAu­tum­n­fes­ti­val in­China, may boost buy­ing fur­ther, ac­cord­ing to Ivy Ng, re­gional head of plan­ta­tions at CIMB In­vest­ment Bank Bhd.

“If fes­ti­val de­mand is good they’ll have to buy be­cause they don’t have­much­stock,” Ng said by phone from Kuala Lumpur. “This is­thesec­ond­grandest­fes­ti­val in China af­ter the spring fes­ti­val. Typ­i­cally, dur­ing fes­ti­vals peo­ple tend to con­sume more oil.”.

Palm oil stock­piles in China are now about 300,000 tons, the low­est since at least 2010, the China Na­tional Grain and Oils In­for­ma­tion Cen­ter saidon Au­gust 3. Pur­chases typ­i­cally rise a cou­ple of months be­fore the Mid-Au­tumn Fes­ti­val that starts on Sept 15 as re­fin­ers and food­mak­ers re­stock ed­i­ble oils.

“They’re try­ing to re­plen­ish their stocks level be­fore the fes­ti­val sea­son kicks in,” David Ng, de­riv­a­tives spe­cial­ist at Phillip Fu­tures Sdn, said from Kuala Lumpur. “Palm oil is pre­ferred by food­mak­ers be­cause of its low price.”

With palm oil’s dis­count to soy­bean oil widen­ing to as much as $138 ton on July 12 com­pared with an av­er­age of $80 in the first half, price-sen­si­tive buy­ers may switch to palm to meet their con­sump­tion needs.

Ear­lier this month, Chi­nese com­pa­nies or­dered be­tween 80,000 and 120,000 tons of im­ported palm oil for de­liv­ery from Oc­to­ber to Novem­ber to ben­e­fit from its dis­count to lo­cal prices, ac­cord­ing to the CNGOIC.

Still, full-year im­ports may not match pre­vi­ous years as pro­duc­ers grap­ple with lin­ger­ing El Nino dam­age and China steps up sales of stock­piled canolaand­soy­beans, ac­cord­ing toTom­myXiao, an an­a­lyst with Shang­hai JC In­tel­li­gence Co.

“Given the low do­mes­tic stocks, im­ports could jump any time when­ever prices are fa­vor­able,” Xiao said. Monthly palm im­ports could re­sume to about 300,000 tons a month, he said.

Palm oil yields in the world’s big­gest grow­ers In­done­sia and Malaysia are strug­gling to re­cover from one of the strong­est El Ni­nos on record. Pro­duc­tion growth is slow and stressed trees may only show a faster im­prove­ment in yields from Septem­ber on­wards, ac­cord­ing to Zakaria Ar­shad, chief ex­ec­u­tive of­fi­cer of the world’s big­gest crude palm oil pro­ducer Felda Global Ven­turesHold­ings Bhd.

LU BIN / FOR CHINA DAILY

A worker pre­pares moon­cakes at a work­shop in Yiwu, Zhe­jiang province. The coun­try's palm oil im­ports from Malaysia jumped 68 per­cent in July from June as the forth­com­ing Mid-Au­tumn Fes­ti­val has boosted do­mes­tic de­mand for ed­i­ble oil.

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