BUYERS are on the hunt for palm oil cargoes, traders and industry officials said yesterday, as fears of a supply squeeze in Malaysia mounts.
China, the world's top vegetable oil consumer, is looking to boost its palm oil inventories as stocks have slipped below the usual 400,000-tonne level, while India has only covered about 33 per cent of its requirements for May delivery.
Both countries will have to rely more on top producer Indonesia, which is expected to harvest up to 20.6 million tonnes this year compared to Malaysia's output projection of 17.9 million-18 million tonnes.
Palm oil prices jumped as much as 2.2 per cent yesterday on the news but fell back as soon as traders booked profits on the supply-driven rally.
"Malaysia appears to be losing some market share because too many buyers are chasing too few supplies," said a plantation official in Sabah.
Palm oil stocks in Malaysia hit a 20-month low by the end of March as exports outpaced production in absolute terms.
Indonesia, which does not issue regular data, is expected to see a drawndown although the impact will be less, traders say.
Industry officials said palm oil firms with plantations and refineries in Malaysia and Indonesia were diverting more orders to Indonesia, although port congestion in Indonesia could delay shipments.
Companies such as Wilmar International, Sime Darby, IOI Corp and Kuala Lumpur Kepong have extensive plantation holdings in both Southeast Asian countries.
"These big boys in the China palm oil market are also offering discounts to Chinese buyers so that soyaoil does not eat into its share even during this hot weather," said a Malaysian trader dealing regularly with China.
The discounts offered were up to US$30 (US$1 = RM3.63) a tonne, making the selling price of palm oil at US$790 cost and freight, while rival Argentine soyaoil would cost US$870 a tonne.
India is expected to import about 450,000 tonnes of palm oil products for May, about 5.8 per cent higher from a year ago due to rising consumption.
"We have been caught a little flat-footed here because we expected palm oil prices to have corrected by April but it's just been moving from strength to strength," another Indian vegetable oils trader said by telephone from Mumbai.
"There are just 10 days left in April and we are far behind in our coverage for May." - Reuters
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