UPDATE 2-China lockdowns overshadow palm oil outlook despite output slowdown
China has been a disappointment for sellers -James Fry
Malaysia benchmark seen at 4,500-3,500 rgt/T to March-Mistry
Palm oil output downtrend "alarming" -Mielke
By Bernadette Christina
NUSA DUA, Indonesia, Nov 4 (Reuters) -
The global outlook for palm oil remains uncertain, with strict COVID-19 policies in major-importer China weighing on demand, while high energy prices and a slowdown in output provide support, leading industry analysts said on Friday.
Malaysian benchmark futures earlier this year had surged to record levels of more than 7,200 ringgit per tonne due to top producer Indonesia's export restrictions, which culminated in a three-week export ban starting late April.
Prices have since come down amid concerns over a global economic slowdown and as China maintains a strict COVID-19 containment policy that has caused mounting economic damage.
"China has been a real disappointment for sellers of vegetable oils because the market happens to be under the lockdown all the time," James Fry, chairman of commodities consultancy LMC International, told participants at the Indonesia Palm Oil Conference in Bali.
"I can't see this changing very quickly," he said, contrasting the situation with the bright spot of top vegetable oil importer India, which has seen purchases rise up to September.
Palm oil prices on a free-on-board basis at Indonesia's Sumatra ports could ease to $920 per tonne from $940, Fry said.
Malaysia's benchmark prices are expected to trade between 3,500 to 4,500 ringgit per tonne in the period from now until the end of March next year, said Dorab Mistry, director of Indian consumer goods company Godrej International.
The contract was trading at 4,375 ringgit per tonne by 0842 GMT on Friday.
Mistry no longer expects palm futures to fall to 2,500 ringgit per tonne, an estimate he made in September, unless Brent crude prices drop to $70 per barrel. Brent crude is currently trading above $94 a barrel.
Meanwhile, global palm oil production during Jan-Dec in 2022 is expected to be 78.3 million tonnes, Thomas Mielke, head of Hamburg-based analyst firm Oil World, told the same conference, noting that output has been on a downtrend in recent years, which he said was "alarming."
Global palm oil output is seen rising by 2.9 million tonnes in the 2022/23 season, Mielke said.
All the analysts were also monitoring Indonesia's plan to increase its biodiesel mandate to B40, which contain 40% of palm oil, from 30% currently.
Fry said if Indonesia implemented its B40 biodiesel mandate in January, Sumatra's FOB prices could reach $1,080 per tonne in June.
Mielke warned that if the biodiesel policy is not considered carefully, it could cause further prices volatility down the line.
Indonesian officials said on Thursday high crude oil price were making it more feasible to use a higher mix of palm oil in fuel. (Reporting by Bernadette Christina Writing by Fransiska Nangoy Editing by Ed Davies)
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