Palm oil prices in Malaysia posted sharp losses as concerns grew over falling Chinese demand due to the spread of the novel coronavirus (Covid-19), according to ICIS.
On 28 January, the first day of trading after the Lunar New Year break, crude palm oil (CPO) prices closed at US$661.12/tonne and palm kernel oil (PKO) at US$809.73/tonne, falls of 9.88% and 11.59% respectively, ICIS wrote.
“The spread of the coronavirus has led to a lockdown of cities in China, and curfews and curbs in travel, which would likely lead to lower usage of edible oils in the food industry and a slowdown in Asia’s economic activity.”
However, the Malaysian Palm Oil Board (MPOB) said on 4 February that while the outbreak had reduced consumption of edible oil at restaurants, this would be compensated by higher demand for packaged foods such as instant noodles.
“Instant noodles use a lot of palm oil,” Reuters quoted MPOB director general Ahmad Parveez Ghulam Kadir as saying. “As people stay at home to reduce their exposure to the virus, they will eat at home more and this will definitely increase the demand for instant noodles.
“While there are issues with exporting, the demand for palm oil (in China) will always remain,” he added.
China is Malaysia’s second largest customer for palm oil after India, buying 2.5M tonnes last year, Reuters wrote.
Meanwhile, Indonesian Palm Oil Association GAPKI said the nCoV outbreak was likely to hamper Indonesia’s palm oil exports.
“I hope the coronavirus outbreak will not last too long since all export activities to China have been stopped temporarily,” Gapki executive director Mukti Sardjono was quoted by the Jakarta Globe as saying on 4 February.
The world’s largest palm oil producer exported some 6M tonnes of CPO and PKO to China, its largest market for these products, the Jakarta Globe wrote.
According to Worldometers, the total number of nCoV cases globally as of 6 February 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 had been reported in 27 other countries and 1 death reported in Hong Kong and one in the Philippines.
The BBC said there were strict restrictions on moving out of Wuhan, the centre of the outbreak, and the lockdown had also been extended to other parts of Hubei province, preventing business-related travel as well as the movement of goods and workers. This had impacted restaurants, cinemas, transport providers, hotel and shops. International retailers, such as coffee shop chain Starbucks and furniture seller IKEA, had closed operations in China.
China was also an important player in international supply chains, supplying parts to the global motor industry, electronics sector and mobile phones and computers. Carmaker Hyundai, for example, said it had suspended production at its plants in South Korea because of a disruption to the supply of parts.
Meanwhile, shipping companies such as Maersk, MSC Mediterranean Shipping, Hapag-Lloyd and CMA-CGM, were reducing the number of vessels connecting China and Hong Kong to Canada, India, the USA and West Africa, CNN Business wrote on 6 February. The companies said moves to idle Chinese factories had curtailed demand for vessels.
International shipping association BIMCO also reported limited or no demand from Chinese buyers of seaborne commodities such as coal, crude oil and iron ore.
Stock markets in China also saw their biggest daily fall in five years on 3 February by 8%, the Guardian reported. After just minutes of trading, a range of China-traded commodities fell by the maximum allowed in one day, including iron ore, nickel crude oil, palm oil and eggs