Palm oil inventories near record highs in China are slowing orders from the world’s second- biggest buyer and will weigh on prices, a Beijing-based researcher said.
Imports in the six months through September may fall to 2.39 million metric tons, from 3.56 million tons in the first half to March 31 and 2.68 million tons a year ago, said Liu Xianwu, general manager of China Cereals & Oils Business Net, the country’s biggest independent oilseed researcher. Inventory at ports is near the peak of 1.46 million tons and will remain above 1 million tons until at least July, he said.
Government measures to increase food safety and a switch to soybean oil by more affluent consumers has driven palm inventories to a level equivalent to more than two months’ consumption. Liu said slowing purchases by China and rising global output will hurt prices, which have fallen 2.5 percent on the Malaysia Derivative Exchange this year after slumping 23 percent in 2012.
“China’s palm oil demand has markedly slowed since last year, and that’s helped create this persistently high inventory,” he said in a telephone interview yesterday. “This represents a shift in consumption behavior.”
Palm oil for June delivery fell as much as 1.3 percent to 2,350 ringgit ($761) a ton on the Malaysian bourse today. The price may fall to about 2,100 ringgit in the next two months before rebounding, Liu said.
His forecast for imports of about 5.95 million tons for the marketing year through September compares with a projection of 5.9 million tons by Leon Xia, an analyst at Shanghai JC Intelligence Co., and Oil World, which expects 6.75 million tons. Shipments last year were 5.94 million tons, according to data from the U.S. Department of Agriculture and China’s customs agency.
Indonesia and Malaysia are the world’s biggest producers of the tropical oil and India is the largest buyer.
To contact Bloomberg News staff for this story: William Bi in Beijing at email@example.com