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Palm Oil Imports by China to Drop, Boosting World Stockpiles

Palm oil imports by China, the world’s biggest cooking oil consumer, are set to plunge this month after the government imposed more stringent inspections on shipments, potentially increasing global inventories.

Imports may be 300,000 metric tons in January, less than half of those in December, according to the median of estimates from six traders and researchers compiled by Bloomberg.

Stockpiles in Malaysia, the second-largest producer, advanced to a record in December, while exports fell 25 percent in the first 10 days of January, according to Intertek data. China’s quality watchdog, the General Administration of Quality Supervision, Inspection and Quarantine, toughened inspections on imports of cooking oils from Jan. 1 to improve food safety.

“The government has told companies and other countries that it will strictly enforce quality standards, and that’s causing shipments to plunge to half the usual level,” Leon Xia, an analyst at Shanghai JC Intelligence Co., said Jan. 10.

Futures slumped 23 percent last year as stockpiles expanded in Malaysia and in Indonesia, the biggest producer, and economic slowdowns in Europe and China curbed demand. Rabobank International said on Jan. 10 that uncertainty about Chinese demand may weigh on prices on the Malaysia Derivatives Exchange.

Price Gain

Prices rose as much as 1.4 percent to 2,402 ringgit ($796) on the bourse in Kuala Lumpur today and traded at 2,371 ringgit by 5:34 p.m. after Plantation Industries and Commodities Minister Bernard Dompok said the country set its export tax at zero for a second month in February to help spur shipments.

Traders in China rushed to get orders shipped before the changes, said Xia. Shipments were 654,232 tons in November, the highest since December 2011, customs data show. Imports may have been 703,600 tons in December and could be 221,800 tons in January, the Ministry of Commerce forecast on Dec. 24.

Inventory at major ports in China climbed to a record 1.1 million tons as of Jan. 7, according to the China National Grain & Oils Information Center. Li Yuanping, a spokesman at quality watchdog, declined to comment.

Under China’s national standards in effect since 2009, refined palm oil can’t have acidity of more than 0.2 percent, said Xia. Most shipments have to be processed before being sold commercially, he said. In practice, imported cargoes were bought and sold with little restriction, he said.

Buyers now have to declare if their cargoes are for further processing or direct consumption, in which case they must meet the standards or be rejected, said Xia.

‘No Clarity’

“Importers without refining capacity will face increased costs as they deal with potentially problematic shipments,” Bu Yiwen, general manager of research at Julong Group Co., the biggest privately owned domestic palm oil importer, said by phone from Tianjin on Jan. 9. “It may take a few months for trade to resume normalcy,” he said.

The Malaysian Palm Oil Board has engaged with the Chinese authorities on the regulations, Dompok said in Kuala Lumpur.

“They are trying to improve food safety generally in China, not just focused on the palm oil industry,” he said at a conference. “There’s no clarity yet.”

To contact Bloomberg News staff for this story: William Bi in Beijing at wbi@bloomberg.net

To contact the editor responsible for this story: Brett Miller at bmiller30@bloomberg.net

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