Dalian Commodity Exchange Opens Up Palm Oil Futures Market to Foreigners

(Yicai Global) Dec. 24 — The Dalian Commodity Exchange, one of four futures exchanges on the Chinese mainland, will begin allowing overseas investors to participate in the futures trading of refined, bleached and deodorized palm olein, a type of palm oil, from today in order to exert more influence on global prices.

China imports all its palm oil, which is used in a wide range of commodities from cooking oil to animal feed. Around half of all the products in a supermarket, both edible and non-edible, are made with palm oil.

The DCE began trading in RBD palm olein futures back in 2007. It was the first solely imported product to be traded in futures in China back then and is now the seventh commodity future product available to overseas investors.

The world’s main palm oil producing areas are in Southeast Asia. However, manufacturers tend to not participate in the markets, leading to big discrepancies between the price of the product at source and abroad.

Introducing foreign participants into the palm oil futures market will help to integrate domestic and overseas markets and better link domestic and offshore prices, said Hu Jie, director of the agricultural products department at the DCE.

The inconsistency in the price of palm oil in China and abroad is due to a problem with the pricing mechanism, said Fang Ming, general manager of New Strength Food Technology. Palm oil producers are not able to set prices in different markets which is a big headache for them.

By allowing foreign access to DCE palm olein futures, the price difference between domestic and offshore oil prices should return to reasonable levels, Fang said. It will also help spread the influence of the DCE in the international market, and will assist China’s oils and oil seeds industries to go global, he said.

Editor: Kim Taylor

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