Palm rebounds on likely higher China imports, biodiesel hopes

SINGAPORE: Malaysian palm oil futures reversed losses on Tuesday, as prospects of imports by China improved and top producer Indonesia said it would stick with its original biodesel plan.

The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange rose 10 ringgit, or 0.3%, to 3,416 ringgit ($841.59), after closing 1.1% lower on Monday.

Supporting prices was a potential rise in palm oil imports by China next year to 6.4 million tonnes from 6.2 million tonnes in 2020, an official with the Malaysian Palm Oil Council said.

Meanwhile, Indonesia announced that it would return to its original plan of allocating 9.2 million kilolitres of unblended biodiesel next year, a week after an official said the country may have to reduce the allocation due to lower fuel demand amid the coronavirus pandemic.

The Indonesian government requires its diesel to be blended with 30% biocontent made out of palm oil, aiming to be less dependent on fuel imports and sop up palm supply.

Also propping prices were higher soyoil on the Chicago Board of Trade (CBOT), a Kuala Lumpur-based trader told Reuters.

CBOT soyoil rallied overnight to reach a 6-1/2-year high, as prolonged worker strikes and dry weather in Argentina squeezed global supply prospects. It was last up 0.3%.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

On the Dalian Commodity Exchange, soy and palm oils fell 2.7% and 3.1%, respectively.

Capping gains, however, was news that Malaysia would raise its January export tax for crude palm oil to 8% from 6.5% in December, a circular on the Malaysian Palm Oil Board website showed on Tuesday.