China stockpiles hurt CPO prices

KUALA LUMPUR: PALM oil dropped to the lowest level in more than two weeks after a report that buyers in China, the largest consumer of cooking oil, built the biggest-ever stockpiles before the country tightened rules on imports.

The contract for March delivery fell as much as 1.5 per cent to RM2,382 a tonne on the Malaysia Derivatives Exchange, the lowest price for the most-active contract since December 21, and was at RM2,397 at 4:04 p.m. in Kuala Lumpur. Prices fell for the fourth straight day.

With effect from January 1, China imposed more stringent rules on edible oil imports to improve food-safety standards. Palm oil inventory at major ports in China climbed to a record 1.1 million tonnes as of Monday the China National Grain & Oils Information Center said in a report yesterday. 

Malaysia's palm oil reserves reached an all-time high in November. Official data on holdings in December are scheduled on January 10.

"Demand from China may be lower in January," Benny Lee, market strategist at Jupiter Securities, said by phone in Kuala Lumpur. As total sales have also slowed, inventories in Malaysia may expand further, said Lee.

Stockpiles in Malaysia were 2.53 million tons in December compared to the record 2.56 million tonnes a month earlier, according to the median of estimates from six analysts and two plantation companies in a Bloomberg survey published on Monday.

China's imports from Malaysia jumped 24 per cent to 866,340 tonnes in November and December last year from 698,000 tonnes in the same period in 2011, according to data from Societe Generale de Surveillance (SGS). Total shipments from Malaysia fell 7.9 per cent to 1.52 million tonnes in December, SGS said on December 31. 

Palm oil for May delivery lost 1.7 per cent to close at 6,844 yuan (RM3,343) a tonne on the Dalian Commodity Exchange. Soybean oil for May fell 0.3 per cent to end at 8,660 yuan a tonne.

Soybeans for March delivery were little changed at $13.8725 a bushel on the Chicago Board of Trade. Soybean oil for delivery in March lost 0.1 per cent to 49.89 cents a pound.

Meanwhile, palm oil exports from Indonesia may climb about 10 per cent to an all-time high this year as output gains to a record and sales of refined products increase, according to an industry group.

Shipments may climb to 20 million tonnes from an estimated 18.2 million tonnes last year, according to the Indonesian Palm Oil Association or Gabungan Pengusaha Kelapa Sawit Indonesia (Gapki). Output will probably expand 5.7 per cent to 28 million tonnes.

"Export of refined products may be more than 60 per cent of total shipments in 2013, because the tariffs are lower than crude palm oil," Susanto, head of marketing at Gapki, told reporters in Jakarta yesterday. That would compare with 58 per cent in 2012, he said.

Demand for refined products especially from China, the world's biggest edible oil consumer, is promising and will continue to increase, he said. Indonesia exported about 3 million tonnes of palm oil to China in 2011, according to data from Gapki. Shipments in the first 10 months of 2012 reached 2.4 million tonnes, down about 2 per cent from a year earlier.

Indonesia needs to cut its export tax to avoid losing market share to Malaysia in countries such as India and Pakistan that typically buy more of the crude variety, Gapki secretary-general Joko Supriyono said.

Indonesia cut the export tax on crude palm to 7.5 per cent this month from 9 per cent in December, while Malaysia set the tariff at zero. The Indonesian duty for refined products such as palm-based biodiesel and refined, bleached and deodorised palm oil are set at zero for this month, according to data compiled by Bloomberg.