US-China trade feud to benefit Malaysia, other palm exporters

A worker collects palm oil fruit at a plantation in Kampung Bukit Hijau, Kuala Selangor March 14, 2018. — Picture by Mukhriz Hazim
A worker collects palm oil fruit at a plantation in Kampung Bukit Hijau, Kuala Selangor March 14, 2018. — Picture by Mukhriz Hazim

KUALA LUMPUR, April 5 — Palm oil producers such as Malaysia are poised to gain from China’s retaliatory move to impose a 25-per cent tariff on US soy imports, according to analysts.

Crude palm oil (CPO) is a direct competitor to soy in the edible oleins market, and China’s tariff is set to significantly shift demand there towards palm.

China is the world’s largest soybean importer and the biggest buyer of US soybean, with trade estimated at US$14 billion last year.

The country was also the third largest destination for Malaysia’s CPO exports last year, receiving 1.92 million tonnes after India (2.03 million tonnes) and the European Union (1.99 million tonnes).

MIDF Investment Bank senior research analyst Alan Lim Seong Chun was quoted by The Star as saying that China’s move was positive for the CPO price, “as we expect higher China demand for palm oil in the long run”.

“In the long run, we expect a lower volume of soybean oil, which is a by-product of the soybean crushing supply in China.

“On the other hand, palm oil stands to benefit from this situation, as it is a common substitute for soybean oil for use in the food-processing industry,” he was quoted as saying.

China yesterday hit back at US President Donald Trump's plan to impose tariffs on US$50 billion of Chinese goods by proposing the 25-per cent tariff on 106 types of American imports including soy products.

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