Demand for palm oil from China and India to increase

Demand for palm oil from the world’s top buyers China and India is expected to pick up in the near future as prices for the vegetable oil are currently reasonable compared to those of its rivals, Reuters reported, citing a statement from the Malaysian Palm Oil Board (MPOB).

The statement said palm oil prices of 3,900 ringgit ($889) per tonne were currently considered “optimum” and were expected to remain at that level, helped by a recovery in soybean oil prices.

Last year, crude palm oil was more expensive than crude soybean oil due to tight supplies and logistical problems caused by floods, as well as an increase in Indonesia’s biodiesel blending mandate to 40%.

However, vegetable oil supplies have since improved and production is expected to increase in the coming months. This has put pressure on the Malaysian palm oil contract, causing prices to fall 12% this year. Analysts expect the crude palm oil (CPO) price to return to a fair spread with its main competitor this month.

MPOB said China is expected to increase palm oil imports in May and June to replenish stocks, coinciding with the start of the summer season when palm oil consumption typically rises. India is also expected to take advantage of the current low palm oil prices to replenish its depleted stocks as the price gap between palm oil and soybean oil in the domestic market has narrowed, it said.

Despite the recovery in production seen in March, MPOC said total palm oil output could decline slightly to around 19 million tonnes in 2025, as first-quarter cumulative production remained the lowest in three years, with year-on-year production likely to decline until September.

Malaysia’s palm oil inventories will continue to rise, but the increase is expected to be modest and limited by weak year-on-year production growth.

Tags: China, India, Malaysia, palm oil