The expectation of tight supply in the first half of 2022 has continued to support the rise of the palm oil market, but as Indonesia gradually relaxes palm oil exports and concerns about a global recession emerge, the palm oil market has begun to fall under pressure. The negative news in the oil and fat market increased in the second half of the year, and palm oil may be difficult to continue its strength.
The palm oil market was "popular" in the first half of the year. The overall palm oil market in the first half of 2022 was in an upward channel, and the price center of gravity showed a significant increase compared with 2021. The national average price of 24-degree palm oil at the port was 13,239 yuan/ton, an increase of 62.58% over the same period last year and a increase of 38.32% over the second half of 2021. The price of palm oil has risen to its highest level in the past 10 years, mainly due to the export policies of major producers and the international financial environment.
The news is changing, palm oil prices first rise and then fall
The macro impact turns from long to short: the international situation from January to May, international crude oil prices continue to rise. In addition, supported by the increase in the proportion of diesel blending in the United States and Brazil, the good prospect of biodiesel stimulates palm oil prices to follow the rise. In June, the United States had a large rate hike and the expectation of continued interest rate hikes was strong. The commodity market generally fell, and the palm oil market was under pressure.
Data source: CME, BMD
Supply and demand imbalance: From the perspective of international supply, the market supply was tight for most of the first half of the year, mainly due to adjustments to Indonesia's export policy. From January to April, Indonesia actively planned and implemented a palm oil export ban, and Malaysia's palm oil production recovered poorly due to insufficient palm plantations. The market is worried about a shortage of palm oil supply and prices continue to rise. However, as Indonesia's domestic edible oil supply tightening situation improved, the palm oil export ban was lifted on May 23. The oil market then loosened, but palm oil continued to rise as Indonesia lifted the export ban and added domestic market obligations, requiring manufacturers to sell some cooking oil to the local market. Affected by this, the palm oil market continued to rise. Afterwards, as Indonesia actively promoted palm oil exports and market expectations that Malay's exports would decrease in June and inventory rebounded, the palm oil market gradually fell in mid-June and entered a decline channel.
From the perspective of domestic supply, due to the continued high international costs and poor domestic demand, palm oil imports are relatively low. According to data released by the General Administration of Customs of China, China imported 105,700 tons of palm oil in May 2022, a month-on-month decrease of 9.94%; the cumulative import volume from January to May was 481,800 tons, a decrease of 72% from the same period last year.
Data source: General Administration of Customs
Low import volume has led to the maintenance of palm oil inventory at domestic ports at low levels, and inventory continues to decline. In the first half of the year, the average monthly inventory of my country's ports (including industrial and brown) was 308,700 tons, a year-on-year decrease of 44.17% and a month-on-month decrease of 34.19% compared with the second half of last year. As of the end of June, port inventory (including industrial and brown) was 193,400 tons, a decrease of 63.52% from the end of January and a decrease of 43.27% year-on-year.
Palm oil prices may fluctuate in the second half of the year
U.S. Department of Labor released data on June 10 showing that the U.S. Consumer Price Index (CPI) rose 1% month-on-month in May. The U.S. Consumer Price Index has risen 8.6% over the past 12 months. This is the largest year-on-year increase since December 1981, hitting a 40-year high. Under such heavy pressure, the Federal Reserve has raised interest rates significantly, among which the probability of continuing interest rates in July is relatively high, and the possibility of continuing interest rate hikes cannot be ruled out in the later period. Affected by concerns about the global recession, the pressure on commodities to fall is relatively high, which in turn affects the international crude oil market. Palm oil, one of the main raw materials for biodiesel, will also be affected. Overall, with concerns about economic recession in the second half of the year, international oil and fats are likely to be unable to maintain their strength in the first half of the year. In addition, under the support of traditional domestic demand season and limited overall supply, it is expected that the decline in palm oil prices will be limited. Therefore, the center of gravity of palm oil prices has shifted down in the second half of the year, and the fluctuation space may be between 8,000-12,000 yuan/ton.
This article is from Zhuochuang Information
