SunSirs: Weather Factors Persist; Upside Potential Expected for China Palm Oil Market

According to spot market data from SunSirs, domestic palm oil prices weakened during early May, exhibiting a volatile downward trend. On May 1, the average market price for palm oil stood at 9,672 RMB/ton; by May 13, this average had fallen to 9,322 RMB/ton—a price decline of 3.52%.

Key Factors Influencing Palm Oil Price Fluctuations

Supply Side: Malaysia's palm oil production in April totaled 1,629,801 tons, representing an 18.37% increase month-on-month. By the end of April, palm oil inventories had risen by 1.71% month-on-month to 2.309 million tons—exceeding market expectations. Coupled with the fact that production has entered its seasonal growth cycle, signals of ample short-term supply continue to emerge, thereby dampening market sentiment.

Exports: From May 1 to May 10, Malaysia's palm oil export volume increased by 8.49% month-on-month; however, overall export activity has not yet fully alleviated the pressure from existing inventories, resulting in limited price support derived from exports.

Demand Side: Domestic end-user consumption of palm oil has not seen any significant boost; demand from the catering and food processing sectors remains steady. Traders have shown a strong willingness to offload stock, yet spot market sales remain sluggish. This has led to an involuntary accumulation of inventories, further driving down spot market prices.

International Market: Major importing nations—such as India—have shifted their procurement toward soybean oil and sunflower oil due to the relatively high cost of palm oil, resulting in a weakening of import demand for palm oil.

Biodiesel Policy Expectations: Indonesia plans to fully implement its B50 biodiesel policy by July 2026. This initiative is expected to significantly boost industrial demand for palm oil and holds the potential to alleviate supply-side pressures over the medium to long term.

El Niño Weather Risks: The World Meteorological Organization (WMO) forecasts that an El Niño event will officially become established between May and July. This raises the risk of drought in Southeast Asian production regions and intensifies expectations of reduced palm oil yields; should drought conditions persist, they would provide medium-term price support.

In Summary: During early May, the fundamentals of the domestic palm oil market remained a complex mix of bullish and bearish factors. Production regions have entered their seasonal growth cycles, while futures market performance has been mixed. Given the generally moderate level of rigid demand within the domestic market, palm oil prices continued to exhibit a volatile downward trend. From a technical perspective, it is evident that palm oil prices were trading at low levels during early May, with limited downside potential. In late May, the palm oil market is expected to be characterized primarily by broad-range fluctuations, backed by strong upward momentum; prices are projected to range between 9,300 and 9,700 RMB per ton.

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