Indonesia to boost share of China palm oil market as Covid rules ease, say analysts
15/11/2022 (The Edge Markets), Kuala Lumpur - Palm oil demand from major buyer China will likely recover next year, as the country loosens its zero-Covid rules, with Indonesia expected to win a bigger market share than smaller rival Malaysia, analysts said in an online seminar on Monday.
China is the world’s second-largest palm oil buyer, but consumption in the nation of 1.4 billion people has slowed due to Covid-19 lockdowns in several cities putting pressure on prices.
“Exports to China will pick up, as it is anticipated that China would gradually relax its zero-Covid policy, which has hindered palm oil consumption and demand,” Malaysian Palm Oil Board (MPOB) director-general Ahmad Parveez Ghulam Kadir said.
Beijing last week eased some of its Covid rules and said it will keep fine-tuning its steps to control infections, raising hopes of a recovery in demand.
Ahmad Parveez said China is also developing its downstream production capabilities and exploring more investments in its refineries, particularly for specialty fats and biodiesel.
Wang Jun, the dean of Founder CIFCO Futures’ Research Institute in Beijing, foresees strong demand in the fourth quarter, as China stocks up ahead of New Year’s Day and the Lunar New Year, and chooses palm oil because of the higher costs and tighter supply of competing edible oils.
Malaysia, though, will likely lose market share to top producer Indonesia, which is offering more competitive prices.
“The market share of Indonesia has increased year-by-year, while the role of Malaysia has declined,” Wang said.
Nine Indonesian companies on Friday (Nov 11) signed contracts to sell 2.5 million tonnes of palm oil products valued at US$2.6 billion to 13 Chinese buyers.
In 2022, Indonesia is expected to account for 70.65% of China’s palm oil imports, and Malaysia for 29.35%, Wang said.
Estimates from China’s Ministry of Agriculture and Rural Affairs forecast that China’s 2022 palm oil imports will fall by 44% year-on-year to 2.8 million tonnes, Wang said.
However, the ministry expects imports to recover in 2023, rising 60.7% year-on-year to 4.5 million tonnes, he said.