Saturday, December 3

Palm oil drops to two-month low, Chinese demand seen falling

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Palm oil slumped to the lowest in more than two months as exports dropped amid speculation that a slowdown in China’s economy may damp demand from the world’s second-largest consumer after India.

The contract for September delivery retreated as much as 1.8 per cent to RM2,260 (US$710) a metric tonne on the Bursa Malaysia Derivatives, the lowest level for the most-active futures since May 7, and ended the morning trading session at RM2,267 in Kuala Lumpur.

Palm for local physical delivery in August was at RM2,320, data compiled by Bloomberg show.

Shipments from Malaysia, the second-largest producer, fell 23 per cent to 547,857 in the first 15 days of July from same period in June, surveyor Intertek said yesterday.

China’s economy slowed for a second quarter as gains in factory output decelerated, and is at risk of weakening further as the government reins in credit expansion to reduce the danger of a financial crisis.

“With this general pessimism about demand for crude palm oil, prices are trending down,” said Sim Han Qiang, an analyst at Phillip Futures Pte in Singapore.

“If China’s economy is likely to slow going forward, that will also translate to weaker demand for crude palm oil. We believe the trend is still down and futures are likely to test RM2,200.”

Malaysia left the tax on crude palm oil exports unchanged for a sixth month in August at 4.5 per cent, according to a Customs Department statement.

Soybean oil for delivery in December declined 0.8 per cent to 45.37 cents a pound on the Chicago Board of Trade, while soybeans for delivery in November gained 0.2 per cent to US$12.6025 a bushel.

Refined palm oil for January delivery fell as much as 2.8 per cent to 5,656 yuan (US$922) a tonne on the Dalian Commodity Exchange, the lowest price for the most-active contract since September 2009, while soybean oil for delivery in the same month dropped 1.1 per cent to 7,204 yuan. — Bloomberg