China's palm oil stocks hit record 1.4 million tones

China's palm oil stocks most probably rose to a record 1.4 million tonnes in February as imports surged late last year ahead of stricter quality regulations from January 1, a Reuters survey of five Chinese traders and analysts showed. Record palm oil stocks in China may further depress domestic prices, which are already down more than 8 percent this year, and help keep inflation there under control.
"Stocks in China have been hovering near the one-million-tonne mark for a prolonged period and increased buying before the stricter regulation pushed inventory level to a record high," said Xu Jian Fei, chief economist with Chinatex Grains & Oils Import & Export Ltd, one of China's largest edible oil trading companies. The world's No 2 consumer of palm oil imported 954,087 tonnes of the vegetable oil in December, customs data showed, almost double the average 490,000 tonnes, as traders sought to avoid the new quality standard.
But it turned out to be business as usual after China's quarantine authorities allowed discharge of the first two palm oil cargoes from top exporter Malaysia in late January, easing previous worries that the new standards may hamper shipments. February's imports most likely declined 15 percent to 400,000 tonnes from January's 472,733 tonnes because of the week-long Lunar New Year holiday and a shorter month, according to the survey conducted ahead and during the Bursa Malaysia Palm Oil Conference, which runs from March 4 to 6.
Official data for February imports will be out in late March. The country does not release official data on stocks level. Despite record stocks that are likely to be 56 percent higher than the 900,000 tonnes seen in February last year, respondents said imports may gain further traction with the winter ending in the coming months.
"Palm oil demand will certainly benefit if the weather turns warmer in coming months," said Chinatex's Xu. Palm oil consumption is typically lower in winter as the tropical oil tends to solidify in cold weather. Import demand may also be supported by trading companies that use palm oil orders as a short-term financing channel to obtain cash from banks. "Imports will keep on growing because palm oil consumption is expected to increase as the weather turns warmer and trade-financing companies need to import palm oil to keep their cash flow going," said a poll respondent.