Palm Oil Inventory in China Is Seen at Record Amid Global Glut; Palm Oil Heads for Worst Losing Streak Since 2006 on Inventories

Palm Oil Inventory in China Is Seen at Record Amid Global Glut

Palm oil inventory held at ports in China, the second-biggest importer, expanded to a record last month driven by slow growth in demand and after the biggest-ever purchases in December, according to a Bloomberg survey.

Shipments stored at large ports rose to 1.4 million metric tons from 1.2 million tons in January, according to the median of a survey of three researchers and one trader yesterday. Buyers in China may slow purchases further to absorb the supply that’s accumulated, they said. A separate estimate today from researcher Grain.gov.cn put the reserves at 1.22 million tons.

The inventory in China adds to a glut in the world’s most- used cooking oil, which is caught in a bear market as supply expands to the biggest ever. Reserves in Malaysia, the largest producer after Indonesia, reached an all-time high in December. Futures in Kuala Lumpur fell for an eighth day today, poised for the worst run since 2006.

“China’s imports have been excessive, and we have yet to see a pickup in demand,” said Chen Kai, an analyst at Shanghai Pansun Information & Technology Co., a Shanghai-based oilseed researcher. “Prices may continue to weaken.”

Most-active crude palm futures traded at 2,375 ringgit ($768) a ton on the Malaysia Derivatives Exchange at the midday break in Kuala Lumpur, 28 percent lower over the past year. Refined palm was at 6,628 yuan ($1,065) a ton on the Dalian Commodity Exchange, 20 percent lower over 12 months.

Imports in December, when traders took earlier shipments to avoid stricter quarantine inspections implemented from Jan. 1., surged to a record 954,087 tons, 46 percent higher than November, according to customs data. January’s imports were 472,733 tons.

Malaysian Shipments

China’s imports from Malaysia slumped 15 percent to 246,290 tons in February from a month earlier, according to data from surveyor Societe Generale de Surveillance yesterday. Total exports from Malaysia declined 8.8 percent, the data show.

Global stockpiles will gain to a record 7.203 million tons this season, according to the U.S. Department of Agriculture. Output in Malaysia will total 18.9 million tons in 2013, matching the biggest-ever crop in 2011, the Malaysian Palm Oil Board forecasts. Indonesia may harvest a record 30 million tons, Derom Bangun, chairman of that nation’s board, said on Feb. 18.

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

Palm Oil Heads for Worst Losing Streak Since 2006 on Inventories

Palm oil fell for an eighth day, the worst run in almost seven years, on speculation that declining exports may keep inventories near record high in Malaysia, the largest producer after Indonesia.

The contract for May delivery dropped as much as 1.1 percent to 2,370 ringgit ($766) a metric ton on the Malaysia Derivatives Exchange, and ended the morning session at 2,377 ringgit in Kuala Lumpur. The losing streak is the longest since March 2006. Futures tumbled 6.3 percent last month.

Palm, used in foods, biofuels and cosmetics, has slumped 28 percent in the past year as supply and stockpiles surged to records and demand for the tropical oil fell due to a global economic slowdown. Inventories in January were at 2.58 million tons, holding near an all-time high of 2.63 million tons in December, according to the Malaysian Palm Oil Board. Exports declined 9.1 percent to 1.33 million tons in February from the previous month, surveyor Intertek said yesterday.

“We were hoping to see an increase in exports but it was a decline month-on-month, and that’s one of the factors that pressured prices,” said Benny Lee, chief market strategist at Jupiter Securities Sdn. in Kuala Lumpur. “Inventories will probably stay at these levels.”

An increase in Malaysia’s export taxes on crude palm oil this month will curb demand, Lee said. A 4.5 percent tax will be imposed on shipments in March after allowing duty-free exports in the first two months of this year.

Soybean oil for May was little changed at 49.14 cents a pound on the Chicago Board of Trade. Soybeans for May delivery were also little changed at $14.5275 a bushel.

Refined palm oil for delivery in September was little changed at 6,632 yuan ($1,066) a ton on the Dalian Commodity Exchange. Soybean oil for delivery in the same month declined as much as 0.8 percent to 8,224 yuan a ton, the lowest price for the most-active futures since September 2010.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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