POINTERS: Impact of US-China Trade War (Round2) on China's Palm Oil Demand

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Questions & Answers (12) :

Edmund Yong

4 years ago

As Renminbi (CNY) has been weakening to above 7.05 level against USD. Will it affect the import of palm oil into China ?

Cai Neng Bin:
The weakening of the RMB exchange rate has led to higher import costs, boosted China's import inflation expectations and pushed up the market price. China's palm oil is mainly imported on the basis of futures against landed price. If the RMB depreciation is too fast, it will also lead to the expansion of negative margin for import, which is not conducive to China's imports, even reverse shipments washout in pursuit of trade profits, which is not conducive to the rebuilding of China's stock, and also to China's consumption.
4 years ago

HCLeow

4 years ago

May I know import of biodiesel mainly through which ports in China ? The usage is it mainly at the port for the vessel and not for the land transportation?

Cai Neng Bin:
China imports most biodiesel through Guangdong, followed by Zhejiang, Jiangsu and Shanghai. Due to the requirements of temperature and diesel engine, and combustion kinetic energy, it is mainly used for ships with low diesel requirements.
4 years ago

Tey Poh Leng

4 years ago

1)根据你发表的17页；请问为什么中国要通过香港进口PME? 这对中国有任何好处？ Page 17; why China import PME via Hong Kong? Any advantage to use Hong Kong as a window to import PME? 2)中国会不会出台新政策鼓励厂家来使用生物柴油？中国有没有任何津贴鼓励厂家使用PME或乙醇吗？ Is China come out with any new Policy to encourage usage of Bio-fuel? PME or Ethanol, what are the subsidies been given to the industry players? 3)根据你发表的8页: ASF已经造成猪的数量有明显的减少；请问这需要多久时间才会恢复原本的数量？ Page 8; since Hogs numbers been reduced significantly due to ASF; it will take how long to recover back to original level or numbers. 4)哪些省已经严重受到ASF影响？ Which provinces had mostly affected by ASF?

Cai Neng Bin:
Import of PME through Hong Kong is only the difference of customs clearance for trade purpose. No impact on overall China's PME import. At present, China has more policies on the use of ethanol gasoline. There are B5 plans but no substantive incentive to support the wider implementation, so PME trade and usage is more sporadic individual market behaviour. At present, there is no effective vaccine for ASF, the impact cycle is long-term, and it will also change the structure of China's aquaculture and meat supply. At present, the epidemic situation has basically covered all provinces, the only difference is in time sequence and the degree of recurrence.
4 years ago

Akmal

4 years ago

Slide 18 shows rapeseed oil and soybean oil spread and palm oil and soybean oil spread. Could you explain why is it that when rapeseed oil and soybean oil spread rises, palm oil and soybean oil spread decline. You forecast China’s palm oil import is expected to rise substantially post 2017/18. But MPOB latest figures does not show that China palm oil import will increase that much. Could you provides update on the changing market share of Malaysian and Indonesia since the US-China trade war starts. What is the current discount Indonesia is providing to China market over Malaysian palm oil.

Cai Neng Bin:
Policy changes and medium- and long-term supply expectations of oil's fundamentals led to widening of the price spread between soybean oil and rapeseed oil, and palm vs soybean oil. In order to show the palm-soybean price spread, the calculation is made using palm price deduct soybean oil prices, so it is getting more negative but the spread is getting wider like rapeseed-soybean oil. As Indonesia's output increases and prices are more competitive, China's shipment ratio from Indonesia has increased, and Indonesia's proportion has reached more than 60%. The trend has little to do with the trade war. China adopts CNF quotation, and hence the source is more determined by exporters.
4 years ago

George Teh

4 years ago

Mr Cai, can you please comment on reports (e.g., Reuters) that Brazilian soybeans quality (e.g., protein contents) may not meet Chinese requirement? If so, how significant is such shortfall and does that imply meaningful upward export opportunities for Malaysian palm oil? Thank you.

Cai Neng Bin:
The lower protein content in Brazilian soybean will be reflected in the premium/discount of imports price, and China will still import a large quantity of South American soybeans if there is crushing margin. Shortages experienced by markets will be corrected through price rises and subsequently better margin. As long as South America's soybean supply is ample, China will not have a serious shortage. The growth rate of oil consumption in China has been very low. At present, there is no shortage of oil supply. The substitution effect of palm oil has been demonstrated and there is limited room for further increase.
4 years ago

Anthony Yap

4 years ago

因为ASF的事故，中国政府开始鼓励工业式的养猪业。请分享中国政府是否出台任何奖励和政策来鼓励工业式的养猪业? (Heard that due ASF; China Government now encourage Industrial Farming of Hogs; any incentive and policy been published? Please share?)

Cai Neng Bin:
China's swine/hog industry has been fully market-oriented, the industrial scale of breeding has become a trend, and the policy is more about the compensation and control measures for the occurrence and disposal of the epidemic. The government is focusing more on limitation outlined under the environmental policies. The African swine fever will cause difficulties in the recovery of the later stages, and the market will adjust the breeding profit and breeding enthusiasm through the pig price.
4 years ago

MOHD RAFIZAN BIN SAMIAN

4 years ago

Is sustainable palm oil have any effect on China consumption trend? ie, will China buy more if all our palm oil is certified as sustainable?

Cai Neng Bin:
China’s oils & fats consumption and trade structure has little relationship with regards to the sustainability of palm oil from country of origin, price is the main factor. If the price is right, China will import more as inventory.
4 years ago

Mohd Feroize

4 years ago

Due to differing soybean planting season, traditionally China has to rely on US soybean supply towards the end of the year until mid of next year. As it is approaching the end of the year, has China prepare itself to reduce its reliance on US soybean i.e. has it import a lot of Brazilian soybean earlier. DCE palm oil price has moved up recently. Can it be read as an indicator that China that China is going to face huge soybean shortfall soon and very favourable palm oil import situation in China is forthcoming.

Cai Neng Bin:
The uncertainty of the US-China trade dispute still remain, but China is prepared for a lower import of US soybean. With the African swine fever causing the reduction in soybean meal demand, while China has purchased large quantity of South American soybean in Jul-Sep period, and as well as the US soybean that has traded during the negotiation which would arrive towards end of the year, all these will ease the soybean shortage in Oct-Dec period. Besides that, China has also stepped up the soybean import from Russia, and hence, China will not experience a serious shortages in soybean supply. The rise in DCE palm olein price recently was mainly due to compounded impact of increase in import cost and the lower import of palm olein, but the wide discount of olein against soybean oil signifies the worry of higher import of palm olein in coming months.
4 years ago

Yazid Mustafa

4 years ago

I understand that big players in China has refineries that can refine CPO. Would you be able to explain why China do not choose to import CPO and refine. The country mostly import refined pam oil. TQ

Cai Neng Bin:
China hardly import CPO for refining mainly due to the import duty structure. The import duty and VAT of CPO and RBD Palm Olein in China are the same at 9% respectively, while RBD Palm Stearin’s import duty is 8% & 2% (according to different melting points). Hence, there is no incentive for the Chinese players to import CPO to refine when importing RBD Palm Olein and Stearin will incur same or lower tax, which means lower cost against CPO.
4 years ago

Jessie Fan

4 years ago

Good Day, Mr Cai, You mentioned imports by China is based on cost against DCE futures. How is this being calculated and what is the import margin for palm olein now? Tks. Jessie

Cai Neng Bin:
The palm product traded on DCE futures is RBD Palm Olein, which import tariff and VAT are both 9%, then converted into RMB according to interest and exchange rate, plus miscellaneous charges at the port to can get the total landed cost, then corresponding to DCE's futures contract delivery of January, May and September, to calculate the initial hedging import profits. Taking into consideration of the different shipping time, we also consider the interest of financing cost, warehousing fee and delivery cost, and ultimately get the actual delivery profit. According to market monitoring, the RBD Palm Olein import margin as of 20 Aug 2019 for September shipment (against DCE Sep contract) is RMB-115.
4 years ago

Amy

4 years ago

Mr. Cai. Would appreciate if you can report on the position of China state reserve of soybean, soybean oil, rapeseed and rapeseed oil. Do you expect China state reserve will hold it auction on these commodities in a significant way in the mear future. TQ

Cai Neng Bin:
The auction volume of China's State Reserve soybean is not large, and so its impact on the market is limited. The key is whether those soybeans that were being purchased in large quantities for reserve or through national policy negotiations (with US) will be crushed or not when they are being brought into the country. Soybean oil has rotation requirements, pay attention to whether there is profit margin and balance of market supply. As for the temporary state reserve rapeseed oil, the remaining volume is insignificant and hence it will no causing any impact to the oils & fats market.
4 years ago

POINTERS SECRETARIAT

4 years ago

1) 蔡先生；你好；1)中国目前港口棕榈油的库存是多少？ 2) 中国目前Palm Biodiesel 的进口量从马来西亚和印尼是多少？1) Mr. Cai. What is the current level of palm oil stocks in China ports. 2) What is the current palm oil biodiesel import volume for Malaysian and Indonesia? (Posted by POINTERS secretariat on behalf of Ms. Annie Lim. English translation made by the secretariat)

Cai Neng Bin:
Currently, the palm oil stocks at China ports is around 660,000 MT, 12% lower than last month but 29% higher than the same time last year. Following the high arrival of palm oil in August, the stock is expected to rise further. The import of biodiesel by country has already been given in the PPT.
4 years ago