China’s demand for Malaysian palm oil products set to rise

The migration from rural to urban cities will improvise the lifestyle and buying powers per capita of the rural Chinese

by HARIZAH KAMEL / Pic by BLOOMBERG

CHINA’S rapid development and changes in consumer behaviour will create more demand for Malaysian palm oil products in years to come.

Perfect Hexagon Ltd executive VP in sales and operations Thian Soon Onn said about 70% of palm oil is consumed in the food sectors.

“Palm oil products have good shares in non-food products like healthcare products which are booming as well such as oleochemicals following China’s continuous reform policies for growth of inner township that has been robust in recent years,” he said in a panel discussion titled “Palm Oil Market Outlook In East Malaysia and China” at the East Malaysia Crude Palm Oil Futures Virtual Ceremony Launch 2021 yesterday.

Commenting further on China’s demand outlook on palm oil, Thian said the developments of China’s inner areas generated an emerging and new growth market for palm oil products.

“The migration from rural to urban cities will improvise the lifestyle and buying powers per capita of the rural Chinese, this will encourage the usage of refined oils and create more opportunities for palm oil imports as it increases the opportunities for palm oil to be promoted for branding with other soft oils,” he said.

Malaysian Palm Oil Council regional manager Desmond Ng said recent developments in China indicate there might be some changes in years to come which will open rooms for more or continuous steady increase of palm oil demand and imports.

Ng also shared that China’s demand for oils and fats has been growing steadily, though there is a sign of lower growth rate in recent years which is closely associated with the GDP growth and some other factors as well.

Nevertheless, the absolute volume of growth in demand is still at the range of half a million tonne to one million tonne, and this came despite the slowdown in population growth as improvement in living standards has led to the higher demand and expenses from the consumer sector.

UOB Kay Hian Securities (M) Sdn Bhd director of Asean plantation research Leow Huey Chuen said UOB views the current elevated high prices will continue to stay at least into the first quarter of 2022 at RM3,800 and above per tonne.

“For the full-year forecast, our expectation is the prices could range on the average between RM3,500 per tonne to RM3,800 per tonne for 2022,” she said.

CGS-CIMB Securities Sdn Bhd head of Malaysia research Ivy Ng forecast an average price of RM3,700 per tonne for crude palm oil in 2021 and RM2,900 per tonne in 2022.

“Going into 2023, we have lowered it to around RM2,800 per tonne. The forecast price is higher than historical average, and suggests the challenges with regards to trying to improve yield and so forth are being partly inflated into forward average prices,” she added.

According to a Bloomberg report, palm oil stockpiles in Malaysia probably eased from a one-year high, as a strong recovery in exports countered a small rise in production.

Data compiled by Bloomberg shows inventories fell 0.5% in September from the previous month to 1.866 million tonnes.

The Malaysian Palm Oil Board will release official stockpiles, production and export data on Oct 11.