Bumper year ahead for palm oil imports in China
It looks like it’s going to be a promising year for palm oil imports in China, the world’s biggest agricultural market.
Shipments to the second-biggest buyer of the oil may surge to a six-year high in the 12 months ending September, according to state-run China National Grain and Oils Information Center.
The ongoing trade spat and the spread of a swine disease that’s destroying China’s hog herd is reducing the country’s imports of soybeans, which is used as animal feed and produces palm’s rival soyoil.
“China’s palm oil consumption and imports will accelerate significantly in 2019,” said Aurelia Britsch, the head of commodities at Fitch Solutions in Singapore.
Low palm oil prices, declining domestic inventories and a slump in soybean imports from the U.S. due to the trade spat will boost palm oil demand, she said.
The added purchases from China could help benchmark prices for the commodity recover from a dismal two-year loss.
Increasing production in major growers Indonesia and Malaysia and slumping demand from top customer India have left stockpiles bulging and traders eager to ship out more of the oil to key buyers.
China’s imports of palm oil to climb 17 percent from a year earlier to 6.2 million tons in the year ending September, according to China National Grain and Oils Information Center.
That would be the highest since a record 6.59 million tons in 2012-13.
China’s palm oil imports will depend on how much the demand for soybean meal, which is used in animal feed, drops because of the spread of African swine fever, said Julian Conway McGill, Head of South East Asia at LMC International Ltd.
The Year of the Pig Will Be a Pig of a Year for China’s Hogs
The trade negotiations between President Xi Jinping and counterpart Donald Trump may also play a crucial role after China slapped import tariffs on American soy and slashed purchases.
The two nations are progressing on talks, and the reduced tensions as well as a soy supply glut in South America could limit palm’s prospects, analysts said.
Domestic output of soyoil, a soybean byproduct, may drop 6 percent to 15.6 million tons this year as bean imports drop by 7 million tons, CNGOIC said.
High soyoil inventories in China, which was around 1.57 million tons in early January, could also provide a ceiling for total vegetable oil imports this year, said Oscar Tjakra, a senior analyst for grains and oilseeds at Rabobank International.
Still, at least for now Chinese buyers are already showing their love for palm. Purchases in December climbed ahead of the Lunar New Year celebrations, said Zhu Yao, an analyst with Founder CIFCO Futures Co. in Beijing.
Typically palm oil is blended with other oils for frying and preparing dishes like ‘sliced fish in hot chili oil,’ a popular treat during the festivities.
New year boost
Imports of palm oil for cooking surged to the highest in 15 months in December, customs data showed.
In 2018, edible palm oil purchases climbed to 3.57 million tons, the highest since 2015, the data showed.Palm oil is also likely to be preferred by Chinese buyers as its rivals, such as rapeseed oil, have become expensive due to crop concerns in Europe, McGill said.
“Palm oil is fantastic given it’s cheap, versatile and being produced in a region very close to China, and is certainly very competitive,” McGill said.