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Second Half 2015 - Anticipating Market Price Direction:
Outlook of China's Oils & Fats Market - Post Withdrawal of Financing Traders and Return of Palm Oil Stock Level to Normal
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1. There is structural division of global oilseeds market, where local and foreign markets behave differently.
- Global soybean output continues to increase and the competition between North and South American soybean intensified. SUR of US is tighter than South America. Global output of rapeseed also declined, leading to tight supply. China abolishes the rapeseed temporary reserves policy, cutting down the needs to import rapeseed.
2. Output of China soybean declined and almost none used for crushing. On the other hand, soybean import growth remains and the withdrawal of financing traders improve the crushing margin.
3. China abolishes the temporary rapeseed reserve policy and leads to increase availability of domestic rapeseeds for auction and supply in near future. This reduces the needs for import of rapeseed and rapeseed oil, and reduction of rapeseeds stock in the country.
4. Withdrawal of financing traders also leads to significant decline of oils & fats stock level, improving the margin for imported oils & fats.
5. Lower soybean oil price competed and took some market share from palm olein in food industry but demand for palm stearin remained stable. Overall palm oil demand is expected to return to its normal level.
6. Nevertheless, import of palm oil will still be influenced by import margin and hedging activity, as stock level returned to normal level and steep discount between market price and landed cost disappeared.
7. Soybean oil remains the leading oil in the growth of China oils & fats demand. Increase in rapeseed oil supply very much depends on the extensiveness of the implementation of country’s policy but the release of domestic rapeseeds stocks to the market in inevitable. Supply-demand condition of palm oil remains stable, while distinctive seasonal demand with price fluctuation conditions maintained. Periodical or regional demand and stock changes may influence price. There is increase intensity of import hedging with the change in profit margin. Oils & fats consumption more diversified.
8. Oils &fats prices are currently at its low with upward movement expected due to the periodic tightness of stock level. El Niño effect remains the prime factor for significant price hike of oils & fats.
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Second Half 2015 - Anticipating Market Price Direction |
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Archives |
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MITIGATING THE NEXT WAVE OF MARKET UNCERTAINTIES Nov 14, '22 ~ Nov 18, '22 |
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ASSESSING 2022: MANAGING OPPORTUNITIES AND RISKS Mar 28, '22 ~ Apr 01, '22 |
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Section 2: Opportunities for Palm Oil in Asian Market Oct 18, '21 ~ Oct 24, '21 |
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Section 1: Oils & Fats Supply, Demand and Outlook Oct 18, '21 ~ Oct 24, '21 |
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Section 1: Price Direction Apr 05, '21 ~ Apr 11, '21 |
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Section 2 : Special Focus on the US Apr 05, '21 ~ Apr 11, '21 |
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POINTERS ON THE PRICE TRENDS Jun 22, '20 ~ Jun 28, '20 |
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Section 1 : CPO Price Trend Feb 24, '20 ~ Mar 01, '20 |
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Section 2: Global Palm Oil Market Opportunities Feb 24, '20 ~ Mar 01, '20 |
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Section 2: Special Focus Aug 19, '19 ~ Aug 25, '19 |
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Section 1 : CPO Price Trend Aug 19, '19 ~ Aug 25, '19 |
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Special Focus - India Feb 25, '19 ~ Feb 24, '19 |
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Section 1: CPO Price Trend Feb 18, '19 ~ Feb 24, '19 |
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Section 2: Global Palm Oil Market Focus Aug 06, '18 ~ Aug 12, '18 |
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Section 1: CPO Price Trend Aug 06, '18 ~ Aug 12, '18 |
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Section 2 : Global Palm Oil Market Focus Jan 29, '18 ~ Feb 04, '18 |
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Section 1: CPO Price Trend Jan 29, '18 ~ Feb 04, '18 |
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Section 2: Regional Focus : CIS Countries Aug 21, '17 ~ Aug 27, '17 |
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Section 1: Palm Oil Price Fundamentals Aug 21, '17 ~ Aug 27, '17 |
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Section 2: Market Challenges and Opportunities Feb 20, '17 ~ Feb 26, '17 |
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Section 1: Price Directions Feb 20, '17 ~ Feb 26, '17 |
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Section 1 : Palm Oil Price Fundamentals Aug 22, '16 ~ Aug 28, '16 |
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Section 2 : Trade Issues and Market Prospects Aug 22, '16 ~ Aug 28, '16 |
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2016 Market Direction - Twists and Turns of Palm Oil Prices Feb 22, '16 ~ Feb 29, '16 |
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Second Half 2015 - Anticipating Market Price Direction Aug 17, '15 ~ Aug 23, '15 |
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Special Focus: Indian Sub-Continent Aug 17, '15 ~ Aug 23, '15 |
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Opportunities, Challenges And Trend In 2015 CPO Price Feb 23, '15 ~ Mar 01, '15 |
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2nd Half 2014: Market Challenges, Predictions And Directions Aug 25, '14 ~ Aug 31, '14 |
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Anticipating 2014 Palm Oil Price Direction Feb 17, '14 ~ Feb 24, '14 |
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Prospects For Second Half Of 2013 - Managing Price Fluctuations Jul 22, '13 ~ Jul 29, '13 |
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Mapping The Palm Oil Price - 2013 Market Perspective Feb 18, '13 ~ Feb 27, '13 |
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Palm Oil : Challenges, Opportunities And Latest Market Directions Aug 06, '12 ~ Aug 17, '12 |
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2012 Price Direction, Issues & Challenges Feb 13, '12 ~ Feb 20, '12 |
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Challenges, Opportunities And Latest Price Trend Aug 08, '11 ~ Aug 16, '11 |
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Challenges, Opportunities And Price Direction Feb 07, '11 ~ Feb 17, '11 |
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2010 Year End Prospects - What Lies Ahead? Aug 02, '10 ~ Aug 08, '10 |
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With the exit of financing trader, import of palm oil in China mainly depends on difference between landed cost and DCE (Dalian Commodities Exchange) futures contract, and China will increase imports if there is any profit. Therefore, the main importing month of palm oil in China mainly falls on 1-2 months before the active trading contract month which are January, May and September. While the import margin remains as the main factor influencing the amount of imports, importers will also consider the demand and capacity of storage tank for physical delivery of futures contract concluded in DCE. At present, the deprecation trend of RMB against the U.S. dollar is detrimental for cost of palm oil import of forward contracts. Generally, importers will try to lock in the exchange rate for forward contract but the cost is different among importers. With the recent 3% downward adjustment of middle price for the exchange rate of RMB against USD by the Central Bank of China, this leads to total depreciation of RMB at 4%. Fortunately, during this period the fluctuation of exchange rate was able to be offset by the drop in FOB price as well as the rise of palm olein at DCE. Due to the weaker FOB price, this has slightly improved the China palm oil import margin and raises the import volume and physical delivery of DCE contracts. Such phenomenon also taken place in the first half of this year, where many traders also actively trading September contract at DCE, which led to sharp rise of palm oil import to be witnessed in Jul-Sep period. Unfortunately as discount of palm oil price against soybean oil narrowed, this reduces the interest to use palm oil and subsequently may reduce the import of palm oil thereafter and demand will be generally satisfied through exhausting the stock in China. The import will once again rise in Nov-Sep with the DCE January contract coming into maturity later.
8 years ago