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China’s escalating trade war with the U.S. as well as an upcoming autumn festival are stoking the Asian country’s appetite for a certain golden oil.
The world’s top commodity importer almost tripled palm oil imports from Malaysia during the first 25 days of this month as deepening trade tensions with the U.S. lower supplies of soybean oil, sending buyers hunting for an alternative. That’s just as consumption increases ahead of the Mid-Autumn festival, celebrated on September 13 this year, where the palm is a key ingredient in fried foods and seasonal treats such as mooncakes.
Read also: 5% duty mooted on Malaysian palm oil imports
Palm oil shipments from Malaysia, the world’s second-biggest producer, to China surged 177 per cent from a month earlier to 265,045 tonnes between August 1-25, according to cargo surveyor Intertek Testing Services. China may import a record 6.7 million tonnes of the world’s most-consumed cooking oil in the year from October, according to the China National Grain and Oils Information Centre, as the trade war and the spread of African swine fever curtail supplies of soybeans, leading to lower output in soyoil.
Soybean oil inventories have dropped in China so they must be having an edible oil shortage, said Sathia Varqa, owner of Palm Oil Analytics in Singapore. There’s nowhere to turn except to the golden oil palm.
A jump in exports could further support benchmark palm oil prices in Malaysia, which climbed to a six-month high on Monday on expectations of a boost in demand. Still, Varqa warns that a further price rally risks eroding Chinas appetite for the Malaysian product.
Indonesia has a bigger market share and is cheaper, so it may still dominate China’s demand, Varqa said.
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