Rapeseed oil Purchases by Chinese Market Players Provides some Market Confidence
The Mintec Benchmark Price for rapeseed oil FOB Rotterdam was assessed at €925.50/mt on 5th April, an increase of 5.77% on the week. However, the price is still at the lowest level since February 2021 and, critically, still at a discount compared to palm oil, which was assessed at €962/mt into the EU, for more details on why this is the case, please see a previous article here.
Despite the rapeseed discount to palm still being apparent, significant buying of European rapeseed oil over March and early April has been observed by Chinese traders, with Mintec estimating traded volumes in the range of 120,000 to 200,000 metric tonnes, representing some of the highest imported totals for China of European rapeseed oil on record in the span of a few short weeks. The buying occurred as market players told Mintec that Chinese buyers think that the bottom of the market has been found and that rapeseed oil is outside its ‘fair value’ which they see closer to €1,050/mt. In addition, sources close to the matter told Mintec, “Chinese buyers aren’t too worried about the price they are paying. They are confident that even if they don’t use it themselves, it’s an easy sell into the wider market in the near future. Essentially they see no risk in buying rapeseed oil at these prices.”
Chinese buying has had the knock-on impact of increasing confidence from European players, as bids have emerged into the physical market which was amiss a week or so ago, although lower lows in rapeseed futures meant that trades on the physical rapeseed oil forwards were heard marginally lower than a week or so ago. Therefore, if Chinese buying continues even at lower volumes than are currently being seen in the market, there is the potential that some of the supply glut of rapeseed oil begins to wane in the near term, potentially moving prices upwards with the limitation of a nearby European harvest according to market participants.
Yet, low purchases from the biodiesel sector remain a price recovery concern. Due to volatile Rapeseed Methyl Ester (RME) prices and mild weather, biodiesel producers are foregoing rapeseed oil purchases and are instead opting for long-chain vegetable oils and used cooking oil (UCO) imported from China. Since biodiesel usage accounts for approximately 70% of rapeseed oil demand, a lack of buying from the biodiesel sector could limit upward price moves over April, according to market players.
A trader commented to Mintec, “rapeseed oil prices are too cheap and while I don’t think we are going to see huge gains in the near term, a small move up seems very reasonable and possible. Buying will resume as rapeseed is a preferred material, particularly in the food industry and at these prices we aren’t far off competing with UCO on the biodiesel side.”
