Palm oil dropped for a third day to the lowest in almost eight months as China’s car sales growth slowed, adding to signs the economy of the biggest edible oil consumer is cooling.
September-delivery futures declined 1.9 percent to 2,290 ringgit ($714) a metric ton, the lowest price since Nov. 16, on the Malaysia Derivatives Exchange.
Sales of vehicles rose 10.9 percent from a year earlier to 839,228 units last month, the China Automotive Technology & Research Center said today. That compares with 34 percent growth in April and 25 percent in May, according to the center. A Chinese services industry index slid to a 15-month low in June. The measure fell for a third month to 55.6 from 56.4, HSBC Holdings Plc and Markit Economics said in an e-mailed statement.
“The biggest issue now is the fear or worries on China,” said Carey Wong, an analyst at OCBC Investment Research in Singapore. The market was relying on China’s “urbanization to drive long-term demand for the edible oil,” he said.
A stronger ringgit is also helping damp investor demand for the tropical commodity priced in the Malaysian currency, Wong said. “There are a lot of moving parts at the moment” that are influencing palm oil prices, he said.
The ringgit advanced for a second day on expectations the central bank will raise borrowing costs for a third time this year, boosting the appeal of local assets. The currency rose 0.5 percent to 3.2080 per dollar as of 6:18 p.m. in Kuala Lumpur, making commodities priced in the Malaysian currency more expensive for overseas buyers.
Still, concerns about delays in oilseed planting in India, the largest palm oil buyer, may support prices, Wong said.
India’s largest soybeans and peanut growing areas need rain in a week to aid sowing and avert a drop in cooking oils output for a second year, officials said last week. The delay in rains is a “cause for concern but it’s too early to jump to any conclusion on output,” B.V. Mehta, executive director of the Solvent Extractors Association of India, said July 2.