KUALA LUMPUR: Malaysian palm oil futures tumbled on Thursday, as fears of US tariffs imposed on China and muted demand for palm sparked a broad sell-off in the vegetable oils market.
The benchmark palm oil contract for February delivery on the Bursa Malaysia Derivatives Exchange slid 140 ringgit, or 2.91%, to 4,675 ringgit ($1,047.50) a metric ton during the midday break.
The contract declined 2.21% in the previous session.
The sell-off in Chicago soyoil spilled over into the Dalian oils, which then contributed to a decline in Malaysian palm futures, said Paramalingam Supramaniam, director at Selangor-based brokerage firm Pelindung Bestari.
“Speculations that the incoming Trump administration will impose a 40% tariff on China contributed to the sell-off in the vegetable oils market,” he said, adding that the tariffs could shift China’s purchase of US soybean and soyoil to Brazil and Argentina.
Dalian’s most active soyoil contract fell 1.24%, while its palm oil contract shed 3.3%. Soyoil prices on the Chicago Board of Trade were down 0.14%. Palm oil tracks price movements of rival edible oils, as they compete for a share of the global vegetable oils market.
Palm edges lower on weaker export demand and Chicago soyoil prices
“The demand for palm is also a significant concern in November and December as India has apparently already bought sufficient supplies and as a result, arrivals are expected to be abundant,” he said.
Oil prices edged higher on supply concerns triggered by escalating geopolitical tensions amid the ongoing war between Russia and Ukraine.
Stronger crude oil futures make palm a more attractive option for biodiesel feedstock.
The ringgit, palm’s currency of trade, strengthened 0.13% against the dollar, making the commodity more expensive for buyers holding foreign currencies.
US soybean futures hit a two-week low on Wednesday and fell more than 3% on expectations of plentiful South American soy harvests this year along with uncertainty about demand for soy-based biodiesel fuel, analysts said.
Palm oil may break support at 4,732 ringgit per metric ton, and fall into 4,647 ringgit to 4,679 ringgit range, Reuters technical analyst Wang Tao said.