CCM: China's market price of palm oil continues rising in 2016 08-18-2016

In 2016, the market price of palm oil keeps climbing up for 5 consecutive months in China. According to CCM's price monitoring, the average market price of palm oil (24°) is USD881.68/t (RMB5,692.56/t) in May 2016, a MoM rise of 1.11% and a YoY rise of 8.87%.


Market price of palm oil (24°) in China, Jan.-May 2016


Source: CCM


As the domestic supply and demand remains stable recently, the rising market price of palm oil is mainly affected by the following external factors:


- The yield reduction in producing area of palm oil


The first quarter of a year is the traditional slack season for palm oil production. Coupled with the influence of the El Nino phenomenon, the dry weather affected the yield in producing area. "The El Nino phenomenon reduces the global output of palm oil by over 2 million tonnes in 2016," said James Fry, president of LMC International at the Palm Oil Industry Conference held in Kuala Lumpur in Feb. 2016. Therefore, the sliding yield stimulates the domestic market price to go up.


- The mounting price of competing product – soybean oil


According to CCM's price monitoring, the market price of soybean oil also continues rising for 5 consecutive months in China in 2016. In April, the average price of soybean oil (first grade) at port was USD992/t (RMB6,407/t), up by 5.99% MoM.


China's palm oil relies on import. The import volume of palm oil is also increasing in 2016. China's imported palm oil mainly includes palm stearin (HS code: 15119020) and palm olein (customs code: 5119010). In Q1 2016, the import volume of palm oil was about 1.15 million tonnes, up by 20.60% YoY.


Notably, China mainly imports palm oil from Malaysia and Indonesia. In 2015, 57% and 43% of palm oil was mainly imported from Indonesia and Malaysia respectively (total import volume: 5.89 million tonnes). The import price was USD538.94/t in Q1 2015, a MoM rise of 2.8%.


Due to the rising palm oil price, the price gap between palm oil and corn oil is narrowing. China's palm oil is widely applied in the food industry, which is a direct competing product for corn oil. When the market price of palm oil keeps rising, that of corn oil continues falling.




In May 2016, the average market price of corn oil (first grade) is USD1,308.35/t (RMB8,447.61/t), down by 2.5% MoM and 1.86% YoY.  The price gap between palm oil (24°) and corn oil (first grade) narrows to USD426.67/t vs. USD784.93/t in Dec. 2015. Thanks to this, corn oil enjoys increasing price advantage and it will grab some market shares of palm oil.


Market price of corn oil (first grade) in China, Jan. 2014-May 2016


Source: CCM


Price gap between palm oil (24°) and corn oil (first grade) in China, Jan. 2015-May 2016


Source: CCM


The effect of the El Nino phenomenon on palm oil production often lags. After calculation based on the experience of previous years, the effect of the El Nino phenomenon will hit a peak in Aug. 2016. Since the third quarter of a year is the busy season for palm oil production, the yield is predicted to be greatly impacted by the El Nino phenomenon this year.


In addition, it is very likely that the La Nina phenomenon after the El Nino phenomenon will bring rainstorm to the producing area of palm oil, reducing the yield further. Therefore, China's market price of palm oil will keep increasing in the future. At that time, the price gap between it and corn oil will further narrow because it is not very likely for corn oil price to rebound in the coming future, which provides a greater opportunity for corn oil to seize market shares.

 

This article comes from Corn Products China News 1605, CCM

 



About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.

 

For more information about CCM, please visit www.cnchemicals.com or get in touch with us directly by emailing econtact@cnchemicals.com or calling +86-20-37616606.

 

Tag: oil  corn



Subscribe to our Newsletter



Next Press