Asia oils-China restocks with palm oil after Lunar Year holidays

KUALA LUMPUR: China, the world's No.2 vegetable oil buyer, is seeking nearby palm oil shipments to replenish stocks after the Lunar New Year holiday although the pace of orders will be slower due to the recent price rally.

China's domestic refined palm olein used in cooking oil is selling at around 10,300 yuan ($1,563) a tonne with import prices for the spot month standing at a much higher 10,800 yuan, potentially limiting the size of purchases, traders said.

Benchmark Malaysia palm oil futures have hit successive three-year highs on strong export demand, particularly from China and concerns of a further stock draw.

"Due to the high palm oil product prices, China will only import about 400,000 tonnes of palm oil each month during January to March 2011," said a trader with a Shanghai-based foreign brokerage.

"In the short term, demand of palm oil may not increase substantially but we might see an increase after June, when prices stabilise." the trader added

Normally, China's average monthly palm oil imports range between 500,000 to 600,000 tonnes, mostly from Malaysia, the world's No. 2 producer although the threat of lower supplies owing to the recent floods may see a shift to Indonesia.

"There have been some firm orders for Indonesian palm olein since crude palm oil available for processing in Malaysia has been limited," said a Singaporean trader with an Indonesian plantation firm.

"The export taxes are higher but there higher quantities of palm oil mitigate that."

But so far, China has been a regular buyer of Malaysian palm olein. Cargo surveyor Societe Generale de Surveillance said shipments to China more than quadruped to 171,452 tonnes for February 1-10 compared to the same period a month ago.

THE WEEKAHEAD

China could slow its palm oil purchases a little in the coming weeks as the government will offer 100,000 tonnes of rapeseed oil during its regular sale next week, traders said.

"There will be a little slowdown because these reserves will be sold at a lower price than palm oil or soyoil prices," said a Malaysian trader.

China has been selling reserves of vegetable oils and grains to rein in inflation that is expected to rise to a more than two-year high of 5.3 percent in January from 4.6 percent in December.