| CHINA’S OILS AND FATS SUPPLY AND DEMAND FOR 2017 – BETTER TIMES FOR MALAYSIA’S PALM OIL INDUSTRY |
52
VIEWS
|
| by Lim Teck Chaii
|
The paper provides the outlook for China’s 2017 oils and fats market.
The continued GDP growth which enable consumers to spend more and rising population are drivers which are expected to stimulate higher demand and imports for oils and fats in China.
For palm oil imports, it is set to grow due the following factors:
1) Malaysia and Indonesia’s production is expected to recover from the tight supply situation of 2016 due to the crop damaging effects of El-Nino
2) China’s low palm oil stock at port at 428,200 MT is the other factor that is expected to propel Chin’s import of palm oil.
This analysis estimates that China will import 6.087 million MT of palm oil, 1.6 million MT higher than 2016. The forecast is within market expectation as China imports around 6 million MT of palm oil annually under normal market situation. If Malaysia maintains its 2016 market share of 41.6%, we expect Malaysia’s exports to China will increase by 656,000 MT to 2.5 million MT in 2017.
2017 China’s oils and fats fundamentals
The above projection are made after taking into consideration the following fundamentals surrounding China’s oils and fats market for 2017.
1) China’s GDP and population will continue to grow in 2017
2) Local oils and fats production will not be enough to meet the country’s requirement
3) China’s 2016 total palm oil import of 4.5 million MT is abnormal. Under normal market situation, the past 5 years trend (2011-2015) shows that China imports around 6 million MT annually
4) The issues and challenges facing China’s palm oil import in 2017 are the same as the preceding years. The issues are as follows;
a) Increasing soyabean oil production suppresses demand for palm oil
Increasing demand for animal feed ingredients has led to huge jump in soybean meal production. Rising soybean meal production increased
China’s soybean crushing activities and soyabean oil produced which suppress the need to import more palm oil.
b) Chinese government periodically release the state reserve of rapeseed and soybean into the market through auction
c) Ongoing discount of market price against landed cost reduces the opportunity of building new business partnership between Malaysian suppliers and Chinese buyers. This situation is especially significant during the period where credit financing were actively used to import palm oil
d) Level of awareness of palm oil application is similar to 2016.
2) Conclusion
China’s oils and fats consumption and import are set to grow strongly in 2017. Continued GDP and population growth are major factors within the oils and fats market that would drive higher oils and fats consumption and imports.
In 2017, our analysis shows that China consumption will increase by 512,000 MT to 36.784 million MT. Meanwhile, imports of oils & fats are projected to increase by 1.365 million MT to 10.885 million MT. Palm oil imports are estimated at 6.087 million MT, 1.741 million MT higher than the country’s 2016 import of 4.346 million MT due to the recovery of Malaysia and Indonesia’s CPO production and China’s growing oils and fats needs.
There is a possibility that China’s State Grain Reserve will continue to auction soybean and rapeseed oil in 2017 from its state reserve. This would reduce the need to import palm oil. However, the possibility is not as high as in 2016 because palm oil price appear to be easing as CPO production in Malaysia and Indonesia are expected to normalize. This development will make palm oil prices more competitive. Thus, there is a reduced need for the state reserve to release their oils and beans stockpile which will suppress the overall oils and fats prices.
The paper concluded that oils and fats import is expected to increase by 1.365 million MT tonnes to 10.885 million tonnes.
Details of the analysis are found in the PowerPoint presentation.
|
|
You need to login to view the report.
|
| Questions & Answers (0) : |
| Please login to post Question & Answer |
|
