Also, the reopening of India’s economy in June this year will result in restocking of vegetable oils as stockpiles are currently low. As at March 1, 2020, AmInvestment Bank saw that the inventory of edible oils at the pipelines and ports in India stood at 1.53 million tonnes against 2.2 million tonnes a year ago.
KUCHING: AmInvestment Bank Bhd (AmInvestment Bank) believes that global palm demand will recover in the later half of the year underpinned by a resumption of business activities.
This comes as countries worldwide are starting to loosen their lockdown laws as cases of Covid-19 pandemic subsides.
“In China, a gradual reopening of restaurants would improve the demand for cooking oil.
“Based on anecdotal evidence, palm oil is usually mixed with peanut oil or other oils in China,” it said in a sector report yesterday.
“We believe that cooking oil accounts for about 30 per cent of palm usage in China while frying oil accounts for another 25 per cent. Oleochemical takes up another 30 per cent of palm oil used in China.”
Also, the reopening of India’s economy in June this year will result in restocking of vegetable oils as stockpiles are currently low. As at March 1, 2020, AmInvestment Bank saw that the inventory of edible oils at the pipelines and ports in India stood at 1.53 million tonnes against 2.2 million tonnes a year ago.
“However, it forewarned that palm demand may not reach the highs of 2019.
“We believe that Malaysia’s palm exports in 2020 would not reach 2019’s peak of 18.5 million tonnes,” it cautioned.
“In spite of a recovery in demand, we believe that the rate of recovery would be slow in the second half of 2020.
“We believe that Chinese consumers would take time to revert to their pre-Covid-19 eating and shopping patterns.
“Also, China is resuming purchases of soybeans as the African swine fever disease eases and as the country fulfils its phase 1 commitment with the US.
“The increase in soybean supply in China is expected to result in higher supply of soybean oil and lower demand for palm oil. China’s palm imports dropped by 34 per cent year on year (y-o-y) in the first quarter in contrast to the 6.2 per cent increase for soybean imports.”
On a positive note, as business activities start picking up ahead of the Deepavali festivities in October, AmInvestment Bank reckoned that India’s palm demand would rise.
“India is expected to buy palm oil in crude form from Indonesia and Malaysia,” it speculated. “Also, India has imposed more restrictions on the imports of palm in refined form to protect its edible oil processors.
“In spite of this, we reckon that India’s palm demand in 2020Fwould not exceed 2019’s 9.3 million tonnes due to a series of events in 1H.
“India’s edible oil importers switched to cheaper substitutes as palm oil prices surged from December 2019 to January 2020.
“Thereafter, the fall in palm demand was exacerbated by the Covid-19 pandemic. India’s palm demand fell by 28.7 per cent y-o-y during the November 2019 to April 2020 period.
“In contrast, India’s demand for soft oils – such as soybean, rapeseed and sunflower –improved by 11.2 per cent y-o-y during the period.”