Demand for palm oil from India and China is expected to increase in coming months as recent price corrections provide attractive entry points for the big buyers, an industry expert said on Tuesday.
Prices of palm oil in Malaysia gained nearly 20% last year, but shed around 12% so far this year as the high prices led to palm oil losing some competitive edge to rival oils such as soyoil.
“We feel in the short term, those markets will come back. We see heavy buying from India, China,” Julian McGill, managing director of advisory firm Glenauk Economics, said.
“We’re not worried for the next year about a build up in stocks,” he told participants at a palm oil forum in Jakarta.
He noted Indian buyers, who have been cutting palm oil imports since December, are coming back strongly with purchase for June to August as prices of palmolein are at a discount compared to rival oils.
He said China’s physical palm oil importers were also actively buying for June to August deliveries.
“The Chinese buyers may stock up quite a lot because their stocks are relatively low,” McGill said.
The demand would help keep palm oil prices between 3,900 ringgit and 4,200 ringgit per metric ton in the coming six months, he said.
The main palm oil contract in Malaysian bourse closed at 3,864 ringgit per ton on Tuesday.
The sustainability of the demand would continue to depend on palm price competitiveness against other oils, with peak export volumes seen around August, McGill added.