Hunger for mooncakes to revive appetite for palm oil

BEIJING — China’s appetite for palm oil imports is set to recover from a 25 per cent 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 tonnenes from January to June after El Nino-weather conditions squeezed supplies and drove prices to two-year highs. Buyers there opted for soybean and sunflower oil, with soybean imports rising by about 3.4 million tonnenes to 38.56 million tonnenes, while sunflower oil imports surged 23 per cent to 470,000 tonnenes, according to 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 per cent to 225,856 metric tonnenes 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 three-day Mid Autumn festival in China, may boost buying further, according to Ms Ivy Ng, regional head of plantations at CIMB Investment Bank.

“If festival demand is good they’ll have to buy because they don’t have much stock,” Ms Ng said on Monday (Aug 8) by phone from Kuala Lumpur. “This is the second grandest festival 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 tonnes, the lowest since at least 2010, the China National Grain and Oils Information Center (CNGOIC) said on last Wednesday. Purchases typically rise a couple of months before the Mid-Autumn festival that starts on Sept 15 as refiners and food makers restock edible oils.

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

With palm oil’s discount to soybean oil widening to as much as US$138 (S$185) tonne on July 12 compared with an average of US$80 in the first half, price-sensitive buyers may switch to palm to meet their consumption needs.

Last week, Chinese companies ordered between 80,000 and 120,000 tonnes 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 canola and soybeans, according to Mr Tommy Xiao, an analyst with Shanghai JC Intelligence.

LOW STOCKS

“Given the low domestic stocks, imports could jump any time whenever prices are favourable,” Mr Xiao said. Monthly palm imports could resume to about 300,000 tonnes 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 Mr Zakaria Arshad, chief executive officer of the world’s biggest crude palm oil producer Felda Global Ventures.

Benchmark palm oil prices in Kuala Lumpur rose 1.1 per cent to RM 2,466 (S$828) a metric tonne on the Bursa Malaysia Derivatives on Tuesday, trimming the decline for the most-active contract to 0.8 per cent this year. BLOOMBERG