Low output boosts China’s Dalian palm oil futures

China’s Dalian-listed May palm oil futures contract rose, boosted by lower-than-expected output and ending stocks of Malaysian palm oil in December. The palm oil May futures contract on the Dalian Commodity Exchange (DCE) closed at 8,978 yuan/t ($1,403/t) on 10 January, up by Yn120/t or 1.4pc from the previous trading day.

This was the highest close since May futures became the primary contract in December. Malaysia, China’s main supplier of product, released its monthly palm oil output yesterday, with only 1.45mn t produced in December, down by 11pc on the month, dragging the country’s palm oil stocks to 1.58mn t by the end of last month.

This was well below market participants’ estimations, boosting palm oil futures both in Malaysia and China. Chinese spot prices moved in tandem with the futures market, with palm oil values in coastal regions of the country rising by Yn100-150/t on the day to Yn10,100 10,200/t on 10 January, according to market sources. Palm oil consumption in China typically declines in winter because of the product’s lower melting point, while rising prices further slowed demand, resulting in a muted market liquidity domestically.

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Tags: China, Malaysia, palm oil futures, spot prices, output, Dalian