December 12, 2001	Wednesday	Ramazan 26, 1422

KUALA LUMPUR, Dec 11: China will use up all its palm oil quota in 2001 to make way for huge imports next year following its entry to the World Trade Organization (WTO), traders said on Tuesday.

The world’s most populous nation is set to import 2.4 million tons of palm oil in 2002, up from this year’s 1.4 million tons, as required under the terms of joining the WTO.

China, which formally entered the world body on Tuesday, buys palm oil mainly from Malaysia and Indonesia, the world’s largest producers.

“There is nothing much left on the quota. I last heard some 30,000-40,000 tons were still available,” said one trader in Kuala Lumpur.

Some traders say China holds the trump card as to whether Malaysia’s crude palm oil futures will test this year’s high of 1,315 ringgit recorded on August 8.

In the past few days, the market was mostly driven by anticipation of fresh purchases by China despite the absence of official word from Beijing on when it will announce the quota.

By midday on Tuesday, the benchmark third-month February contract was down nine ringgit at 1,172 ringgit ($308.42) a ton ahead of fresh estimates for November output, end-month stocks and exports.

Volume was extremely thin at 197 lots.

But there is a general feeling among players China will utilize the palm oil import quota first until soyaoil prices ease in April with the start of South American soyabean crop. China may then use the soyaoil quota, which stands at 2.52 million tons in 2002.

Palm oil is now at a discount to its direct competitor, soyaoil.

Spot crude soyaoil was last quoted at $370 a ton FOB Argentine compared with RBD palm olein at $327 a ton FOB Malaysia.

“Everybody is aware there will be 2.4 million tons of quota available in 2002. It’s just a question of when they are actually going to the market,” said a trader.

“I think what China will do is to utilize all the old quota. Then they will issue the new quota, let’s say, in the middle of January,” he added.

China imported 1.02 million tons of palm oil from Malaysia in 2000, up from 800,135 tons in 1999.

“I think palm oil is going to benefit the most. China will be buying more palm oil because soyaoil is more expensive and there’s a longer distance to ship the oil to China,” said another trader.

Traders said the export figures for December 1-10 issued to cargo surveyor SGS showed China had intensified its purchases, suggesting the country was finishing up the present import quota.

SGS said China was the biggest buyer of Malaysian palm oil for the first 10 days of December, taking 63,364 tons, followed by India which bought 61,055 tons.—Reuters