03.02.2020 (Reuters) - KUALA LUMPUR (Reuters) - Malaysian palm oil futures could fall below 2,500 ringgit over coming weeks if the spread of a deadly coronavirus in China continues to disrupt travel and normal activity in the world’s second-largest palm oil importer, brokers and traders said.
The fast-spreading virus, which has so far claimed more than 350 lives and infected more than 17,000 people in two dozen countries, has raised fears of a sustained disruption in supply chains and eating habits in the world’s most populous nation and second-largest economy.
Dalian palm oil futures plunged by their daily limit of 7% on Monday as trading resumed after an extended Lunar New Year break, but still have further to fall to match the roughly 11% decline in benchmark Malaysian palm oil futures over China’s holiday period. [POI/]
Palm prices had already been under pressure from Jan. 8, when top palm oil buyer India restricted imports of refined grades and informally stopped all purchases from Malaysia over a diplomatic spat between the two nations.
“The bear is out of hibernation,” said Paramalingam Supramaniam, director at Selangor, Malaysia-based brokerage Pelindung Bestari Sdn Bhd.
Malaysia’s benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange plunged 14.9% in January, its biggest monthly drop since August 2014.
The contract was up 1.2% at 2,634 ringgit per tonne on Monday, after dropping nearly 9% last week.
Five traders told Reuters they expect palm oil to fall to between 2,470 and 2,575 ringgit a tonne within coming weeks.
Prices had overextended to the upside in an end-2019 rally and are now coming back down, said Anilkumar Bagani, research head of Sunvin Group, a Mumbai-based vegetable oil broker.
The tropical oil climbed 46.7% from Oct. 1 to Jan. 6 to three-year highs of 3,133 ringgit a tonne on expectations of lower production in both Indonesia and Malaysia due to dry weather and lower fertilizer use.
(GRAPHIC: Malaysia palm oil futures under short-selling pressure on coronvirus, India trade spat - here)