China lockdowns overshadow palm oil outlook despite output slowdown (updated)

Global Palm Resources Holdings

04/11/2022 06:46

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      China has been a disappointment for sellers -James Fry
    

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      Malaysia benchmark seen at 4,500-3,500 rgt/T to
March-Mistry
    

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      Palm oil output downtrend "alarming" -Mielke
    

  
 (Updates throughout)
    By Bernadette Christina
       NUSA DUA, Indonesia, Nov 4 (Reuters) - 
    The global outlook for palm oil remains uncertain, with
strict COVID-19 policies in major-importer China weighing on
demand, while high energy prices and a slowdown in output
provide support, leading industry analysts said on Friday.
    Malaysian benchmark futures  FCPOc3  earlier this year had
surged to record levels of more than 7,200 ringgit per tonne due
to top producer Indonesia's export restrictions, which
culminated in a three-week export ban starting late April.
    Prices have since come down amid concerns over a global
economic slowdown and as China maintains a strict COVID-19
containment policy that has caused mounting economic damage.
    "China has been a real disappointment for sellers of
vegetable oils because the market happens to be under the
lockdown all the time," James Fry, chairman of commodities
consultancy LMC International, told participants at the
Indonesia Palm Oil Conference in Bali. 
    "I can't see this changing very quickly," he said,
contrasting the situation with the bright spot of top vegetable
oil importer India, which has seen purchases rise up to
September.     
    Palm oil prices on a free-on-board basis at Indonesia's
Sumatra ports could ease to $920 per tonne from $940, Fry said.
    Malaysia's benchmark prices are expected to trade between
3,500 to 4,500 ringgit per tonne in the period from now until
the end of March next year, said Dorab Mistry, director of
Indian consumer goods company Godrej International.
    The contract was trading at 4,375 ringgit per tonne by 0842
GMT on Friday.
    Mistry no longer expects palm futures to fall to 2,500
ringgit per tonne, an estimate he made in September, unless
Brent crude prices drop to $70 per barrel. Brent crude is
currently trading above $94 a barrel.
    Meanwhile, global palm oil production during Jan-Dec in 2022
is expected to be 78.3 million tonnes, Thomas Mielke, head of
Hamburg-based analyst firm Oil World, told the same conference,
noting that output has been on a downtrend in recent years,
which he said was "alarming."
    Global palm oil output is seen rising by 2.9 million tonnes
in the 2022/23 season, Mielke said.
    All the analysts were also monitoring Indonesia's plan to
increase its biodiesel mandate to B40, which contain 40% of palm
oil, from 30% currently.
    Fry said if Indonesia implemented its B40 biodiesel mandate
in January, Sumatra's FOB prices could reach $1,080 per tonne in
June.
    Mielke warned that if the biodiesel policy is not considered
carefully, it could cause further prices volatility down the
line.
    Indonesian officials said on Thursday high crude oil price
were making it more feasible to use a higher mix of palm oil in
fuel.
 (Reporting by Bernadette Christina
Writing by Fransiska Nangoy
Editing by Ed Davies)
 ((Fransiska.Nangoy@thomsonreuters.com;))