Malaysian palm oil futures dropped to their lowest in nine days on Thursday as China's factory activity fell, renewing concerns over global economic growth and commodity demand. Losses were limited compared to markets such as crude oil, as palm oil traders were betting export data due next week would show strong demand from European and India.
But news of China's industrial activity dropping in March, with new orders sinking to a four-month low, could see investors slam on the brakes further on palm oil's rally of last week. The rally lost some steam this week in choppy trade as investors feared the market had gone up too high, too fast. Malaysian palm oil futures have gained 5.2 percent this year.
"Now there is this new concern about uncertain economic growth after the China data came out. But I am confident this is a knee-jerk reaction and the market will go up again," said a trader with a foreign commodities brokerage in Kuala Lumpur. Benchmark June palm oil futures on the Bursa Malaysia Derivatives Exchange ended down 0.8 percent at 3,342 ringgit ($1,100) per tonne after falling as low as 3,334 ringgit - the lowest since March 13.
Traded volumes stood at 26,589 lots of 25 tonnes each, higher than the usual 25,000 lots. Reuters market analyst Wang Tao said signals were mixed for palm oil as it continues to hover above support at 3,343 ringgit per tonne. Malaysian exports jumped 14 percent for the first 20 days of March from a month ago, according to cargo surveyors, and traders are expecting the trend to continue when data for March 1-25 is released on Monday. In other vegetable oil markets, the most active US soyoil contract for May delivery dropped 0.6 percent in Asian trade. The most active September 2012 soyoil contract on China's Dalian Commodity exchange fell 0.2 percent.