China, set to overtake India as the world's top buyer of edible oils this year, is expected to scout for cheaper palm oil from Malaysia and Indonesia as summer approaches, instead of soyaoil from South America, traders said.
China's buying appetite for soyaoil from Brazil and Argentina, which has boosted global prices to 15-1/2 year highs this year, is expected to wane since the country has covered 70 percent of its needs for 2004 after booking close to two million tonnes, they say.
"We're going into the palm oil season. It's getting warmer and that's apt for palm oil consumption," said a trader with a global trading firm in Singapore.
In the summer, China usually prefers to consume palm oil used to make everything from red-bean cakes to instant noodles and switches to soyaoil during cooler months because cheaper palm oil solidifies easily at low temperatures.
South American soyaoil was quoted at around $650 a tonne C&F China for shipment in the next few months around $80 to $90 more expensive than Malaysian palm oil.
"They'll continue to buy palm oil substantially in the summer because they haven't bought anything huge beyond June," the trader said.
"They're snapping up palm oil on the spot market, meaning they'll be covering late April or may positions," he said.
China has been active in the palm oil market and is gradually retreating from soyaoil purchases.
It was the biggest buyer of Malaysian palm oil from April 1-10, taking 119,622 tonnes out of a total of 347,908 tonnes, cargo surveyor Society Generals de Surveillance said on Monday.
And in the past 10 days, the country had booked up to 80,000 tonnes of soyaoil for shipment from May through October, at around $650 a tonne C&F China, traders said.
"China has been buying, but amounts have been small.
They won't be buying a lot in the short term," said a second trader in Beijing.
China is expected to utilise almost all of its low-duty import quotas, called tariff-rate-quotas (TRQs), for edible oils this year, including 3.1 million tonnes of soyaoil and 2.7 million tonnes of palm oil.
Its pace of buying has been brisk due to slow crushing. With soyabean prices hovering at multiyear highs, crushers have been making losses over the past few months, traders said.
"Crushers are still making losses buying soyabeans at today's prices. Soyameal prices haven't recovered enough," said a third trader in Shanghai.