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NEWS ADMIN

Mahamad Rodzi Abdul Ghani

DATE

05/04/2002

NEWS PROVIDER

Mahamad Rodzi Abdul Ghani

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NULL

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HEADLINE

China to enter palm oil market this month
05 April 2002 (Business Times) - CHINA will enter Malaysia’s palm oilmarket by end-April as its agriculture sector will no longer be able tocope with strong domestic demand.Hamburg-based Oil World editor Thomas Mielke said China will open itsdoors and start importing within the next four to six weeks.“Oil World’s assessment is that the current restrictive import policy ofChina cannot be sustained because demand is so strong,” Mielke toldreporters in Selangor yesterday.Mielke had earlier given a talk on the commodity’s outlook, organisedunder the programme advisory committee (PAC) seminars.PAC comprises international and local experts of the world’s 17 edibleoils and fats. It advises the Malaysian palm oil sector on the next bestcourse of action.“The satisfaction of demand for oils and oil meals will make it necessaryfor China to change import policy anytime soon,” said Mielke.China, Malaysia’s third biggest buyer last year at 1.28 million tonnes haspledged to buy 2.4 million tonnes of palm oil following its formal entryinto the World Trade Organisation on December 12 last year.The amount is higher by one million tonnes from its traditional annualpurchase of 1.4 million tonnes.The industry had speculated that China would initiate its palm oilpurchase following the expansion of its import volume.Traders have widely speculated that China would start its buying spree asearly as January, a move that was not made till yesterday.China’s State Development and Planning Commission was supposed to announceabout 10 authorised importers from the private sector by March 7., but hasyet to do so.“The temporary interruption of imports was because the Chinese Governmentwants to raise domestic prices so that farmers will plant larger acreageof oil seed crops this spring (April and May),” said Mielke.He added that the move has worked so far as prices have increased in Chinaand farmers have responded positively to the Government’s policy ofpromoting domestic production.“But China’s agriculture sector is by no means in a position to satisfy agrowing domestic demand base.”He said it is difficult for domestic production to keep pace with demandin the medium and longer term as China’s import dependance on oilseeds,oils and oilmeals will rise.“So the interruption in announcing the quota is temporary to raisedomestic prices,” said Mielke.Industry observers had said last month that the delay was partly anindirect trade reprisal on the US for raising steel tariffs to 30 percent.The US is a major producer of soyabean oil and has interests in otherproducing countries such as Argentina and Brazil.The reprisal against soyabean oil has inadvertently affected palm oil aswell.Meanwhile, a trader said that China was already in the market but did notwant to make it official to benefit from the current low prices.“By announcing its intention to come into the market, palm oil prices willno doubt rally,” said a trader.At the Malaysia Derivatives Exchange yesterday, the benchmark third-monthJune delivery closed RM2 lower at RM1,155 a tonne.April, May and July deliveries each closed RM2 lower at RM1,145, RM1,149and RM1,157 a tonne respectively.Volume eased 568 lots to 1,506, while open positions gained 151 contractsto close at 10,834.