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Palm oil body seeks to allay new Chinese regulatory fears

By RJ Whitehead , 02-Jan-2013

The Malaysian Palm Oil Board (MPOB) has sought to assure the market that almost all of its shipments of palm cooking oil to China have met the destination’s quality control specifications.

MPOB’s director general, Choo Yuen May, was speaking in response to concerns raised by the Palm Oil Refiners’ Association of Malaysia (Poram) that the enforcement of China’s new quality control regulations could mean increased rejection for reasons exporters have no control over. The standards came into effect on January 1.

"Based on information given by Chinese authorities, only five per cent of the shipments did not meet their specifications," New Straits Times quoted her as saying.

"Analysis of these shipments showed that non-compliance is mostly related to free fatty acids."

Major trade partner

China is Malaysia's biggest trading partner, with palm oil for use by food processing companies being among the South-east Asian nation’s most significant exports. Every year, China spends some US$4bn (MYR12.3bn) to buy close to 4m tonnes of the kitchen staple from Malaysia.

Poram chief executive Mohammad Jaaffar Ahmad reportedly said China's enforcement of the new rules could open the floodgates for other palm oil importers to demand the same.

"We were told that off-spec shipments will no longer be allowed to be re-refined on China's shores. What redress can Malaysian exporters avail to? This leaves Poram no choice but to advise members to trade at their own risk when selling palm cooking oil to China," Jaaffar said.

However, Choo assured palm oil exporters that MPOB's office in Shanghai had been engaging China's Administration of Quality Supervision, Inspection and Quarantine body to extend the enforcement grace period for the 2009 rule.

The Chinese authority, however, reiterated that the enforcement was applicable to all imports of edible oils. The move was fuelled by China's efforts to improve the safety and quality of imported products.

Stockpiles shrinking

Meanwhile, Reuters is reporting that palm oil has advanced to its highest price level in two months on the back of speculation that flooding will hamper harvesting in Malaysia. This will serve to drive down record stockpiles.

The contract for March delivery jumped 2.6% to MYR2,501 (US$824) a metric ton on the Malaysia Derivatives Exchange, the highest settlement price for the most-active contract since November 1. Futures lost 23% last year as inventories in Malaysia expanded.