Malaysia to export more palm oil to China than India
Published on: Monday, September 14, 2015
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Kuala Lumpur: China is expected to reclaim its top spot as an export destination for Malaysian palm oil from India on pricing and trade financing facilitation measures, said Malaysian Palm Oil Council chairman Datuk Lee Yeow Chor.He said that in the last few years, soybean oil had been cheap so China had imported more of that commodity compared to palm oil.

However, he noted that exports of palm oil to China had grown in recent times due to the high discount of the commodity to its close rival soybean oil.

"What we saw last year and this year is that its import of soybean oil is more than before, hence the volume of palm oil becomes lesser, (assuming) total consumption remains the same. This is because the price of soybean oil was lower, so it imported more of that (commodity)," Lee said at a press conference.

"But now, we are hearing that since April 2015, there has been an acceleration of palm oil imports into China because the discount of palm to soybean oil is quite significant, of more than US$130, so palm oil has become more competitive today," he added.

Lee also said growth in yuan trade financing was expected to be strong from a very low base currently that could aide exports of palm oil to China.

"I expect yuan trade financing to grow in the years to come. For trade financing between Malaysia and China, only about 2.2 per cent is denominated in yuan. And this is very low compared to other countries with offshore trading centres," Lee said. He said that in Singapore, about 40 per cent of its trade to China is denominated in yuan.

"Malaysia has a lot of catching up to do. Trade denominated in yuan can substantially lower costs for companies such as palm oil companies exporting to China as it can bypass the double conversion process to the US dollar," he said.

On the outlook of palm oil prices, Lee said he expected it to be largely flat for now, adding that at this level, prices were conducive for palm oil refiners.

"Refining margins, which have been negative since the third quarter of last year, have become positive in August. For almost 10-11 months, refining margins for palm oil were actually negative. They were losing money before, but now this is positive, leading to greater capacity utilisation," he said.

He said these factors will help propel the total volume of palm oil products.

Malaysia exported 2.8 million tonnes of palm oil to China last year.


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