M’sian palm oil to gain from US-China tiff


Malaysian oil palm exports could stand to benefit from China’s move to impose a 25% tariff on soybean imports from the US as the move could lead to higher demand for palm products, said analysts.

As crude palm oil (CPO) is a substitute for soy oil, analysts believe the Chinese tariff on American soybeans could be good for palm oil producers in Malaysia and Indonesia, who account for about 84% of global palm oil supply.

Rakuten Trade Sdn Bhd research VP Vincent Lau said while a US-China trade war would be generally bad for the world economy, some countries could stand to benefit from it.

“In the near term, palm oil could benefit as it’s a good substitute for soy oil and is attractively priced relative to soy oil,” Lau told The Malaysian Reserve (TMR).

To recall, on April 4, China announced a duty hike of 25% on a list of 106 signature American products with a total trade value matching the US$50 billion (RM193.5 billion) in tariffs outlined in Washington’s draft plan.

The retaliatory measures would impact American products such as planes, autos, chemicals, whiskey and soybeans, and came less than 24 hours after the US government unveiled a detailed breakdown of Chinese products that would be subject to a 25% duty.

“A trade war will not benefit anyone and after all said and done, the gain for Malaysia is temporary because ultimately, it will be muted. Currently, what is moving the market is sentiment and attention grabbing headlines,” he told TMR.

MIDF Research believes the Chinese tariff on soybean is positive to CPO prices as it expects higher Chinese demand for palm oil in the long run.

MIDF Research also expects China to increase its soybean import from Brazil, but the volume is not enough to compensate the import volume from the US.

“In the long run, we expect lower soy oil supply in China. CPO stands to benefit from this as it is a common substitute in the food processing industry,” it said.

China is now the largest buyer of US soybeans, consuming nearly a third of production worth US$14 billion annually.

Plantations companies on Bursa Malaysia, however, have not seen their share price risen significantly since the announcement of the retaliatory tariffs by China.