Friday, October 17, 2008

Financial Crisis Woes Add To Gloom At Malaysia-China Palm Oil Seminar

October 16, 2008 19:39 PM
By Tham Choy Lin
NANJING, Oct 16 (Bernama) -- Sentiment was bearish at the Malaysia-China Palm Oil Seminar 2008 which opened here Thursday as Asian stock markets and crude oil price took another dive in heightened fears of a global recession following poor retail sales numbers from the United States.
Traders attending the two-day seminar came largely to get a better grip of fluctuating prices and the direction of China, the world's largest oils and fats consumer and a key importer of Malaysian palm oil.
Malaysia Palm Oil Council (MPOC) chief executive officer Tan Sri Dr Yusof Basiron, an industry veteran, was sanguine of the outlook for palm oil which had dipped below RM1,800 per tonne.
"The price outlook is very much linked to petroluem prices, that's out of our control but what we can do is to manage the price volatility and supply equation. Once the supply expansion gets back to normal rate, it is a factor of time before the market corrects itself," he told Bernama on the sidelines of the seminar.
The Malaysian government will consider on Oct 21 a proposal to blend up to five percent of palm oil with diesel for use by public transport to shore up the price which has nosedived from a record of over RM4000 per tonne in March to less than half.
Yusof said if approved, the move would trim the country's current palm oil stock of 1.92 million tonnes by between 200,000 tonnes to 5000,000 tonnes.
"This will create a new demand for palm oil and it will offset any big shocks developing and stabilise prices. Before this, our palm oil was not used much for biodiesel and it tends to be traded at a discount even to petroluem," he said.
A commodity broker, who declined to be named, said that the market was leaning towards more downside.
"Consumers are standing on the sidelines and over the past few months, I have not sealed any significant contracts," he said.
Tracing the downward spiral, Martin Bek-Nielsen, executive director of United Plantations Bhd, among Malaysia's industry giants, said the build-up of palm oil stocks, to reach 2.2 million tonnes, from high production this year, had led to concerns that the high prices could not be sustained.
Adding to the pressure was the appreciation of the US dollar, falling price of crude oil and now, the international financial crisis which clipped the possibility of a sustaining level or a rebound after falling through the RM2,000 mark.
"The financial crisis and meltdown of the stock markets has instill such a fear in the minds of people, hedge funds were slaughtered and the general market sentiment is so bearish," Bek-Nielsen said.
He said the crisis had dashed the possibility of the price returning to a sustainable level or by now, a rebound after falling through the RM2,000 mark.
With Wednesday's closing price of RM1,749 and the limit down on soy oil trading, Bek-Nielsen said the price may shed further to the RM1,600 region and he expects it would eventually improved in light of a downturn in supply following the high production this year.
But it would take it another half or one year to see another big appreciation, he said.
"At the end of the day if the financial crisis is as bad as people anticipate, we should be in a period of low price levels until the world economy show signs of improvement," he added.
The seminar, held for the second time since 2006, is organised in tandem with the China International Conference of Seed Crushers.
Nineteen Malaysian companies, including industry players like Sime Darby and Felda, as well as Bursa Malaysia, which is the benchmark in palm oil futures, are taking part.

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