Palm slips as demand fears deepen on coronavirus pandemic

• The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange closed 80 ringgit, or 3.4% down at 2,278 ringgit ($534.87) a tonne.

KUALA LUMPUR: Malaysian palm oil futures closed more than 3% down on Thursday after the World Health Organization (WHO) described the coronavirus outbreak as a pandemic, rattling global markets.

The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange closed 80 ringgit, or 3.4% down at 2,278 ringgit ($534.87) a tonne.

Palm has declined more than 7% this week, dragged down by a sharp drop in crude oil prices and the rapid global spread of the coronavirus despite lower February stockpiles and improving exports ahead of the Muslim holy month of Ramadan.

"We're in uncharted waters," said Marcello Cultrera, institutional sales manager at Phillip Futures in Kuala Lumpur.

The WHO on Wednesday said it was deeply concerned by the alarming spread and severity of the virus outbreak, adding that Italy and Iran are now on the frontline of the disease and other countries would soon join them.

Hurting sentiment further was a slump in crude oil prices amid a broader market rout after U.S. President Donald Trump ordered a restriction of travel from Europe to the United States for 30 days to curb the spread of the virus.

Weak crude oil futures make palm a less attractive option for biodiesel feedstock.

"Some edible oils and biodiesel buyers have been waiting for a floor on palm oil prices over the past few weeks, but the volatility in crude oil has recently impacted demand for the second half the year," Cultrera said.

Palm oil has fallen by about 28% since January, breaking a three-month rally to trade just above October levels.

It seems likely that the low prices will encourage more overseas and local consumption, with palm-based cooking oil becoming much cheaper, Cultrera added.

The Dalian exchange's most-active soyoil contract fell 3.4%, while its palm oil contract dropped by a shade less than 4%. Soyoil on the Chicago Board of Trade was down 2.2%.

Palm oil is affected by price movements in related oils that compete for a share in the global vegetable oils market. ($1 = 4.2590 ringgit)