Palm oil prices in Malaysia recorded sharp losses as concerns grew over falling Chinese demand due to the spread of the new coronavirus (nCoV), according to the ICIS .
On January 28, the first day of trading after the end of the Lunar New Year, palm oil (CPO) prices closed at US $ 661.12/ton and palm kernel oil (PKO) at US $ 809.73/ ton, down 9.88% and 11.59%, respectively, wrote the ICIS .
“The spread of the coronavirus has led to a lockdown of cities in China and time and travel restrictions, which would likely lead to less use of edible oils in the food industry and a slowdown in economic activity in Asia.”
However, the Malaysian Palm Oil Management Board (MPOB) said on Feb 4 that while the outbreak would reduce edible oil consumption in restaurants, this would be offset by higher demand for packaged foods such as instant noodles.
“Instant noodles use a lot of palm oil,” said the Reuters Ahmad Parveez Ghulam Kadir, director general of MPOB. “As people stay at home to reduce their exposure to the virus, they eat more at home and this will definitely increase the demand for instant noodles.
“Although there are problems with exports, the demand for palm oil (in China) will always remain,” he added.
China is Malaysia's second biggest palm oil customer after India, buying 2.5 million tonnes last year, the agency said. Reuters .
Meanwhile, the Indonesian Palm Oil Association GAPKI said the nCoV outbreak is likely to hamper Indonesia's palm oil exports.
“I hope the coronavirus outbreak will not last long as all export activities to China have been temporarily halted,” Gapki CEO Mukti Sardjono told newspaper J akarta Globe on February 4th.
The world's largest palm oil producer exported about 6 million tonnes of CPO and PKO to China, its biggest market for these products, the Jakarta Globe .
According to Worldeters , the total number of nCoV cases worldwide as of February 6 was 28,349, with 565 deaths and 1,387 recoveries. In China, the total number of cases was 28,085, with 563 deaths and 1,365 recoveries. Cases were recorded in 27 other countries and 1 death in Hong Kong and one in the Philippines.
A BBC said there were strict restrictions on leaving Wuhan, the center of the outbreak, and the lockdown was also extended to other parts of Hubei province, preventing business-related travel as well as the movement of goods and workers. This impacted restaurants, cinemas, transport providers, hotels and stores. International retailers such as coffee chain Starbucks and furniture seller IKEA have closed their operations in China.
China has also been a key player in international supply chains, supplying parts to the global automobile industry, electronics sector, and cell phones and computers. Automaker Hyundai, for example, said it suspended production at its factories in South Korea because of a disruption in parts supplies.
Meanwhile, shipping companies such as Maersk, MSC Mediterranean Shipping, Hapag-Lloyd and CMA-CGM were reducing the number of ships connecting China and Hong Kong with Canada, India, the US and West Africa, wrote the CNN Business on February 6th. The companies said moves to idle Chinese factories had reduced demand for ships.
International maritime association BIMCO also reported limited or no demand from Chinese buyers for maritime commodities such as coal, crude oil and iron ore.
Stock markets in China also had their biggest daily drop in five years on February 3 at 8%, the report said. guardian . After just a few minutes of trading, a number of commodities traded in China fell by the most allowed in a day, including iron ore, nickel crude oil, palm oil and eggs.
Source: OFI Magazine
