Palm Oil Gains to Six-Week High as China Signals Demand Rebound

Palm oil gained to the highest price in six weeks after data showed China’s manufacturing increased, fueled by domestic demand, and as a weaker Malaysian currency boosted the appeal of the ringgit-denominated futures.

The contract for November delivery climbed 0.9 percent to 2,356 ringgit ($711) a metric ton on the Bursa Malaysia Derivatives, the highest price at close since July 11. Palm oil for physical delivery in September was at 2,410 ringgit, data compiled by Bloomberg show.

The preliminary reading of 50.1 for the Chinese Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics compares with a final figure of 47.7 in July and the 48.2 median estimate in a Bloomberg survey. A number above 50 indicates an expansion. Malaysia’s palm oil exports to China, the largest buyer after India, rose 49 percent in the first 20 days of August from the same period last month, an estimate from surveyor SGS (Malaysia) Sdn. show.

China is “likely to boost palm oil demand with stronger economic data,” Sim Han Qiang, an analyst with Phillip Futures Pte in Singapore, wrote in a report today.

Refined palm oil for January delivery fell 0.2 percent to at close at 5,524 yuan ($902) a ton on the Dalian Commodity Exchange. Soybean oil dropped 0.4 percent to 7,096 yuan a ton.

Indonesia, the largest producer, cut the tax on crude palm oil exports to 9 percent in September from 10.5 percent this month, Faiz Achmad, director of food and fishery at the Industry Ministry, said today. Malaysia kept the duty at 4.5 percent for a seventh straight month.

Malaysian Edge

“Malaysia still has the advantage when it comes to competing for exports.”said Donny Khor, deputy director of futures and commodities at RHB Investment Bank Bhd.

The Malaysian currency touched 3.3228 per dollar today, the weakest level since June 2010, after minutes from a U.S. Federal Reserve meeting in July showed policy makers backed Chairman Ben S. Bernanke’s plan to reduce stimulus.

“The weaker ringgit makes palm oil slightly more attractive in terms of pricing to price-sensitive customers like India or Pakistan,” Arhnue Tan, an analyst at Alliance Investment Bank Bhd., said by phone in Kuala Lumpur.

Soybean oil for delivery in December climbed 0.3 percent to 43.29 cents a pound on the Chicago Board of Trade. Soybeans for November delivery lost 1.4 percent to $12.855 a bushel.

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