Temporary drop on local palm oil prices due to coronavirus

By SHAHEERA AZNAM SHAH / Pic By RAZAK GHAZALI

MALAYSIA could see a lower uptake of palm oil products from China in the next several months as a result of the novel coronavirus outbreak in Wuhan.

Primary Industries Minister Teresa Kok said the outbreak is expected to temporarily weaken China’s demand for palm oil as there will be undisrupted demands from the food and beverages production.

“The virus outbreak is definitely having an impact on the global economy, including major industries, for the next few months. For the palm oil industry, we have seen palm oil prices decline,” she said at the Reach & Remind, Friends of the Industry Seminar and Dialogue 2020 in Putrajaya yesterday.

“However, I think this is only going to impact the Malaysian palm oil sector for the short term. The prices should rebound once the outbreak has been under control,” she added.

Malaysian Palm Oil Board DG Dr Ahmad Parveez Ghulam Kadir said although the demand for the edible oil is expected to decline from China’s restaurant subsector, there could be a surge in the packed food production as its nationals are restricting their activities.

“We could see higher uptake from the food companies, particularly those who are producing instant noodles as its production uses a lot of palm oil.

“As Chinese people are forced to stay at home to limit their exposure to the virus, they tend to eat in, and instant noodles would be the most available option,” he said.

Despite the lower demand, Malaysian Palm Oil Council chairman Datuk Lee Yeow Chor said there is no urgency for Malaysia to recover the lost volume from China as Malaysia’s palm oil inventory is projected to decline this year.

“We cannot foresee how long the epidemic is going to last, but we know that the stock for Malaysia is at a low level.

“The stock is projected to continue to be at a low level. There is no urgency for Malaysia to sell more palm oil for now,” Lee said.

When asked about any possible delays in commodities shipments to China, Lee said the government has not received information on delivery interruption.

“So far, we have not received information on our shipment being delayed in China,” he said.

As a precautionary measure against the virus outbreak, the Malaysian government has put up screening points at all 64 international entry points in the country for the air, land and sea routes.

The government has also quarantined all ships arriving from China at the ports, including barred sailors and crew members of ships docking at Malaysian ports.

Palm oil prices have retreated since early this year amid the growing concern on the fast-spreading and flu-like virus, which has claimed at least 427 lives and infected more than 20,000 people in 25 countries.

The virus outbreak has raised fears of disrupting the demand in food production in China, which is Malaysia’s second-largest palm oil buyer.

China has been raising its palm oil uptake due to the African swine fever which had curbed oilseed crushing. Last year, its palm oil purchase from Malaysia surged 34% to 2.5 million tonnes.

Palm oil contract for April delivery on the local bourse fell 14.9% last month, which is its biggest monthly decline since August 2014. Yesterday, the contract rose 1.8% to RM2,662 per tonne.