China, the world’s second largest vegetable oil buyer, has slowed palm oil purchases by 20 to 25 percent this month amid swelling stocks at its ports, which may weaken exports and put pressure on prices.
Traders say China’s palm oil stocks are up 25 percent to half a million tonnes, a marked contrast to its port soybean stocks, which have fallen by as much as half in the past three months to 2-3 million tonnes.
Soy imports are expected to surge as China’s food processors try to keep up with soyoil demand but on the palm oil front, China just bought 340,000 tonnes of mostly refined palm olein from Malaysia compared to the monthly 400,000-450,000 tonnes.
“Chinese buyers are not even price sensitive about palm oil these days,” said a Singapore-based trader who deals regularly with the China market. “They usually run away when refined palm oil prices are $650 a tonne but now that equation does not work. They are just buying hand-to-mouth, very small cargoes, as stocks are large.”
Refined palm olein prices now stand at $670 a tonne and traders expect the cash market to weaken on the lack of strong demand. Malaysia’s exports, which had a strong performance in the first half of October, have started to soften.
India has been buying more. Cargo surveyor data for Malaysia’s Oct. 1-25 showed that the world’s top buyer of vegetable oils snapped up 38 percent more palm oil at 86,010 tonnes compared to the same period a month ago.
This week, India bought 20,000 tonnes of crude palm oil from Malaysia and Indonesia at $650 and $680 a tonne based on cost, insurance and freight (CIF), traders said. There may be new orders if crude palm oil prices fall to $625-$630 a tonne.
Cargoes would be smaller though, due to the incoming soybean harvest in India, traders say. Prices of the oilseed have fallen to 21,500 rupees ($452) a ton this week compared to 22,500 rupees a week ago as more soybeans entered the market.
“The new crushing season started this month and soybean arrivals have been gaining pace. Soyoil imports from the U.S. are non-existent for now,” said a leading trader from the Indian port city of Mumbai.
But India is on the lookout for soyoil cargoes for Dec. and Jan. delivery once the soybean crop gets processed, other dealers say.
They say orders will be directed mostly at Brazil and Argentina, which are expected to produce a bumper soybean crop after suffering from drought this year.