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POINTERS 2014 MPOC
Palm Oil Internet Seminar
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Section 1: Palm Oil Price Fundamentals:
China's Palm Oil Import - A Big Turnaround in 2017
By: Mr. Cai Neng Bin

He is the General Manager of Shanghai Pansun Company. His roles and responsibilities in the company are analyzing oilseeds and oils and fats market information, with main emphasis given on systematic data analysis and make judgement on market trading pattern. He is also able to gauge the change of medium to long market trends of agricultural products, and provides trading and hedging strategies through capturing price differences arises from logical error within markets, and between different products and months.
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Synopsis:

1. Tracking the import of oilseeds and oils in China (comparison among major oils and import versus domestic production)

2. Analysis of import cost of oils & oilseeds (tracking of price and price differences among major oils)

3. Effect of the release of state reserve rapeseed oil on oils’ S&D situation (volume compilation and differences among major oils)

4.Evaluation of soybean import in China (analysis of soybean import trend)

5.Structural change of China oils & fats consumption (share of oils & fats consumption)

6. Palm oil import in China (Y-o-Y, and monthly trend, PL vs. PS)

7. Changes in palm oil stock (changes in import pattern and monthly import trend)

8.Change in palm oil prices (price trend, effect of soybean-palm oil price different on substitutability)

9. Assessment of palm oil consumption (Annual comparison, influencing factors)

10. Tracking of oils & fats price difference (SBO-RSO-PL price difference on consumption volume)

11. Judgement on the near term market outlook
(comparison of reality and expectation: evaluation of Chinese oil and fat supply)
(The influence of soybean import on oil consumption and the rhythm of handling of state reserve rapeseed oil)
(Factors such as macro capital, policy deleveraging, price fluctuation at country of origin and other factors affecting the import margin of palm oil, and analysis of trading opportunities)

12. Palm oil imports still have room for improvement.


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Questions & Answers (4) :
Amirah Binti Ahmad
1 month ago
Dear Mr Cai, Could you please advise on the specific regulations for oil palm to be exported into China?
Cai Neng Bin:
There is no change on the requirement of palm oil importers and quality inspection standard by Chinese government. However, since the sources of palm oil supply has increased (refer to individual supplier), China will call for a stricter inspection when import volumes is larger in order to guarantee the safety and stable quality of imported palm products, which is sure to extend the inspection time and cycle. The postponement of shipments and prolonged inspection cycle is expected to disorganize the signed contracts, leading to a tight supply in physical market in short term and strong basis of physical price. However, this will only defer the overall supply balance without reducing the amount of supply.
1 month ago
Huey Chuen
1 month ago
Dear Mr Cai, do you think rapeseed oil auction will resume again soon and how big would be volume for this time? Do you think this will impact the import of palm oil into China again? Thank you.
Cai Neng Bin:
May to September is the major period of domestic rapeseed entering the market after harvesting, so the auction will normally be organized after September in order to minimize the market influence on the purchase of domestic rapeseed. As this year marks the 19th CPC National Congress, the auction of state reserve rapeseed oil will be held after the congress or the earliest in October. According to the acquired and auction volume of 2013 batch of state reserve rapeseed oil, the remaining reserve volume is about 300,000 MT. It needs three weeks to release this into market if it is still being auctioned at 100,000 MT a week. Since the market has high expectation on the market price of this soon-to-be auctioned 2013 batch of rapeseed oil due to shortage in availability of non-GMOs, these oil may not flow into the market with large volume in the short term after being auctioned. Therefore, there is no price competition between rapeseed oil and palm oil and will not influence the consumption and import of palm oil.
1 month ago
Johan
1 month ago
TQ.I gather that in China’s edible oil market, volume of palm oil imported by the country will keep growing despite rising local production of soyabean oil. They claim it on the basis palm oil has special features that make it irreplaceable by soyoil. Do you have comment on the issue?
Cai Neng Bin:
The growth rate of China’s oils and fats demand is slowing down but still increase marginally. The major oils & fats supplied are mainly soybean oil, rapeseed oil, palm oil while limited room for other oils & fats to grow. With the production drop in domestic rapeseed and drawdown of China state reserve rapeseed oil stock, rapeseed oil supply is projected to decrease in medium to long term. Hence, oils & fats demand can only depend on soybean oil and palm oil import. The output fluctuation at producing countries coupled with the requirement on temperature (solidify in winter) and storage limitation of palm oil is unable to assure the stable demand for this oil in edible use every month. Thus, oils & fats demand has to rely on the crushing of imported soybean to close the supply-demand gap. Palm oil will gain more market through the widening price spread between soybean oil and palm oil. Although palm oil production volume fluctuates, the steady harvest and special attributes remain the footstone of oils & fats consumption. Moreover, we also see the steady consumption of RBD palm stearin in China.
1 month ago
Johan
1 month ago
TQ for your presentation. In slide 7, you show that rapeseed oil auctioned by state reserve can be those oil that has been kept by the state reserve as long as 5 years. Am I right to assume that the oil auctioned is purely for non-food use? In slide 8, there are two auction behaviour seen. Aafter 1/12/2016, state rapeseed auction volume appears constant However, the period before it volume auctioned varied. Why? What could have drive this change in behaviour. In slide 10, you claim that rapeseed oil share in market consumption is trending down. Can you explain why? In slide 14, why stock level is so high during 2013 and 2014 period? Much higher than RBD PL imported.
Cai Neng Bin:
The quality of state reserve rapeseed oil purchased before 2012 was slightly poorer, but was able to meet the requirement for food use by refining and have been digested by the market at low price. Subsequently, the quality of state reserve rapeseed oil purchased in 2012 has obviously improved, and was well received by the market. At present, the market has started to digest the state reserve rapeseed oil purchased in & stored since 2013. Because of good quality, the market is expected to store up these rapeseed oils in expectation that the price of these rapeseed oil will appreciate. The quality of state reserve rapeseed oil acquired in 2011 was poor and not consistent which required high refining cost, and led to the downward revision of auction base price from RMB5800 to RMB5300 and subsequently, the market interest pick up. Later, due to the expectation that the price will rise as a result of drawdown in the stock level, the auction volume of 2012 rapeseed oil was basically being fully taken. The auction which started in October 2016 involves those rapeseed oil with good quality and relatively low price against the market, the 100,000 MT auction per week were almost all being fully taken and this round of auction continued until March 2017. The downward trend in the consumption share of rapeseed oil mainly due to the decrease in the overall supply of rapeseed oil. In 2013 & 2014, the high inventory level during these period on one hand was mainly caused by involvement of credit financing import activities which brought in extraordinary high volume of palm oil, while palm oil consumption fell on the other hand.
1 month ago
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