Palm oil purchases by China, the world’s second biggest buyer will likely decline by 11% this year as the slowdown in economic growth that the country is experiencing is causing a tightening of available credit according to a Bloomberg survey. Since palm oil is used commercially and not in private homes, it is much more sensitive to economic dips. In the first quarter of 2014, China’s gross domestic product slowed to 7.4% – the lowest since 2012 and palm oil imports are forecast to decline to 5.9 million tons in the 12 months to September 30 compared to a year earlier. The decline in Chinese palm oil purchases is having a ripple effect on the commodity price traded in Kuala Lumpur which has fallen 8.2% so far this year as demand slows. Traders have long used commodities as collateral to obtain credit however a probe being conducted at Qingdao port over misconduct is causing banks to become much stricter with lending. In the previous marketing year China’s palm oil imports increased to a record 6.6 million tons because traders rushed orders in order to receive shipments before stricter quality requirements went into effect January 1, 2014.
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