Palm-oil imports by China, the world’s biggest buyer after India, are poised to decline to the lowest level in four years as the economy slows and the government seeks to keep cooking-oil prices stable.
Shipments will probably drop by 7 percent to 5.5 million metric tons in 2012 from 5.9 million tons last year, according to the median in a Bloomberg survey of three analysts and two traders. Port inventories in China totaled 760,000 tons last week, 50 percent more than a year earlier, said Cao Huimin, an analyst at Beijing-based China Cereals & Oils Business Net.
Palm oil, used in everything from Nestle SA (NESN)’s Maggi instant noodles and Unilever’s soaps, to candy bars and biofuels, has tumbled 15 percent from a 13-month high in April as a slowdown in China and Europe cut demand, reducing profits at Wilmar International Ltd. (WIL), the largest processor. Palm is trading near the cheapest versus soybean oil in about a year.
“There aren’t many factors working in palm oil’s favor,” said Tommy Xiao, an analyst at Shanghai JC Intelligence Co., China’s biggest independent agricultural researcher. “Domestic inventories are relatively high and government policies on prices and improving food safety aren’t helping,” he said.
November futures gained 0.3 percent to 3,069 ringgit ($990) a ton on the Malaysia Derivatives Exchange today. The most active contract fell to a 10-month low of 2,820 ringgit on Aug. 14 and has lost 3.3 percent this year.
China, the largest cooking-oil user, imported 3.1 million tons of palm in the first seven months from 3 million tons a year earlier, customs say. Indonesia, the top producer, shipped 1.25 million tons from 1.09 million tons the year before, and Malaysia sent 1.83 million tons versus 1.89 million tons.
The world’s second-largest economy expanded 7.6 percent in the second quarter, the slowest pace in three years. The slowdown may extend into a seventh quarter, with Deutsche Bank AG cutting its growth estimate for the three months through September to 7.5 percent from 7.9 percent. Retail sales missed analyst estimates in July.
Arrivals will drop in the second half partly because of inventory levels, said Cao from China Cereals & Oils, a researcher of vegetable oils. The stockpile last week was about 40 percent more than the average at this time in the past five years, she said by e-mail on Aug. 17.
Shipments of 5.5 million tons in 2012 would be 14 percent below the record 6.4 million tons in 2009 and the lowest since 5.3 million tons the year before, customs data show.
Consumption of cooking oils will expand 4.5 percent in 2012-2013 from 4.9 percent the year before, Chang Muping, vice president of oilseeds at COFCO Corp., told a conference in Tianjin last month. Demand for imports will fall as China crushes more soybeans and bottlers limit use of palm oil, he said. Chang restated his view by phone on Aug. 16.
China this year required cooking-oil suppliers to clarify and label the source of their products as part of a campaign to improve transparency on food issues, said Xiao of Shanghai JC. Cheaper palm was often blended with other oils, he said.
The cash price of palm is 2,200 yuan a ton less than soybean oil, the biggest discount since 2008, and that probably won’t change in the near term, Grain.gov.cn estimates. Palm’s share of edible-oil use may slide to 16.3 percent in 2012-2013 from 16.7 percent the year before, while soybean oil expands to 41.7 percent from 40.4 percent, China National Grain & Oils Information Center data show.
Government officials told cooking-oil suppliers in July to keep wholesale prices for packaged products stable to avoid stoking inflation, two people familiar with the talks said at the time. They also asked producers this month to report prices weekly, according to people familiar with the matter.
Soybeans, crushed to produce oil, have soared 43 percent this year on the Chicago Board of Trade and reached a record $17.4475 a bushel yesterday as the worst U.S. drought in half a century destroyed crops. China is the world’s biggest importer.
“The government has advised that companies should avoid increasing prices unless it is absolutely necessary,” according to an e-mail from Wilmar in July.
Growth in palm-oil demand is weak because globally “the whole macro scenario looks quite bad,” Teo Kim Yong, executive director in charge of Wilmar’s merchandising of palm and lauric oil, said in Singapore on Aug. 15. “You see regular demand, but not exceptional.”
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