MUMBAI (Commoditiescontrol)-
Malaysian Palm Oil Futures
Malaysian palm oil futures fell to a three-week low on Friday on concerns that demand could take a hit from a European Union move towards banning the use of palm oil in biofuels.
The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange during the week ending 19th January fell 3.70%, or RM 94, to close at RM 2,441 a tonne.
Palm oil stocks are rising in producing countries which has weighed on palm oil prices.
Prices fell initially after a move by European lawmakers to approve a plan to ban the use of palm oil in motor fuels from 2021.
There are also concerns over high stocks and the lack of demand. There is no bullish news in the market.
Malaysia and Indonesia criticised the European Parliament for backing a ban on the use of palm oil in biofuels, calling the move a protectionist trade barrier and a form of crop apartheid.
A large portion of European palm oil imports are used to make biofuels, giving the palm industry a cause for concern as they fear a decline in overall demand.
Palm oil shipments in the first half of January already showed falling demand, according to cargo surveyor data.
Intertek Testing Services showed a 16.7 percent decline during Jan.1-20 versus the previous month, for the same time period.
Rising production forecasts for 2018 in Malaysia and Indonesia by leading vegetable oils analyst James Fry also weighed on the market.
Global palm oil production is expected to rise by 5 to 6 million tonnes in 2018. Indonesia’s 2018 output at 40 million tonnes and Malaysia’s at more than 21 million tonnes
Inventory levels in Malaysia rose to their highest in nearly two years to 2.73 million tonnes data from the Malaysian Palm Oil Board last week showed. Further traders are estimating that inventories may rise to 2.80 million tonnes in January.
Further the stock of palm oil in China is also increasing which is weighing on market sentiment.
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China buying of palm oil on seasonal demand in January and February may slowdown as stock levels there are seen rising month-on-month and year-on-year from July of last year. Stock levels reached 633,300 tons as of 18 January, a tad below 5 year December average of 650,000 tons.
China typically ramps up export ahead of Lunar New Year which is in February to meet the rising demand for edible oil consumption used of preparing large meals during the festival season. However export to China is seen muted this month, after stockpiles there crept up earlier than expected providing sufficient coverage for the festival. This year the festival is on 15-17 of February.
Malaysia export to China fell by 35% in the first half of January compared to prior month, despite Malaysia suspending CPO export tax for the three months starting in January. Bloomberg reported China domestic palm oil price is calculated cheaper than import prices, further dampening China import appetite.
Domestic RBD Palmolein Scenario
RBD palmoelin price during the week ending 19th January December declined by Rs 7 to trade at Rs 615/10kg at kandla port on poor domestic demand coupled with weak global cues and also CIF price edged lower by $17.5 at $650/tonne.
Demand of RBD palmolein in domestic market is weak as it solidifies during winter season so most of the refiners do not use it for blending with other edible oils.
Indian veg oil imports fell 12.80% in December to 1.089 million tons from prior month to reach the lowest in 11 months, due to steep decline in RBD palm olein and soybean oil imports, according to India Solvent Extractors Association latest data.
Olein imports fell for fifth successive month, declining by 27% to 106,900 tons in December to less than half of the usual monthly average of 220,000 tons, meanwhile CPO imports moved up 8.72% to 608,405 tons, after edging down for the last two months. Imports of veg oils been on a declining trend in India, since the government slammed import tariffs, first in August and then in November to protect domestic producers and refiners.
Meanwhile stocks fell for third successive month edging down 4.0% in December to 2.176 million tons, the lowest in 7 months, though sufficient to meet the monthly requirement, according to the statement from the association.
Indian import tariff on CPO rose from 15% to 30% and on olein up from 25% to 40%, while soybean oil is at 30%. Import tariffs were raised to protect domestic producers and help improve local refining margin from cheaper imports.
NEXT WEEK: RBD palmolein prices are likely to trade as per the trend of Malaysian Palm Oil Futures.
(By Commoditiescontrol Bureau; +91-22-40015516)
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