Palm Oil Prices Under Pressure as Dalian Soy Oil Rises and Stocks Surge

The global palm oil market is facing headwinds as prices slip on the Dalian Commodity Exchange (DCE), driven by competing soy oil trends and a historic stock build-up in Chinese ports. While palm oil has traditionally held a cost advantage over soy oil due to lower production costs, recent dynamics in Dalian are reshaping the competitive landscape, with implications for traders, investors, and commodity markets worldwide.

Price Dynamics: Palm Oil Slips Amid Soy Oil Gains

Palm oil futures on the DCE have declined sharply in recent weeks, with the May 2025 palm olein contract falling to 8,696 CNY/MT in late April—a 0.97% drop—while soy oil (soyoil) futures dropped even further to 7,976 CNY/MT (-1.30%). Despite palm oil’s 2.5% surge to 4,420 MYR/MT earlier in April, fueled by holiday demand ahead of Eid al-Fitr, the broader trend points to weakening fundamentals.

The divergence between the two oils is particularly striking. While palm oil’s price decline aligns with global oversupply concerns, soy oil’s sharper drop reflects broader market pessimism about demand. Analysts note that soy oil’s volatility is also tied to U.S. biodiesel mandates, which could shift feedstock preferences in 2025.

The Stock Build-Up in Dalian: A Supply Overhang

The crux of the issue lies in Dalian’s palm oil inventories, which have surged to record highs. By September 2025, port stocks reached 850,000 tons, a 41.6% increase from June levels. This build-up stems from a 15% rise in palm oil imports into China during Q3 2025, driven by discounted prices from key suppliers like Indonesia and Malaysia.

The stockpile expansion has outpaced domestic consumption, with slower-than-expected demand growth—partly due to consumers shifting to cheaper alternatives like soy oil—exacerbating oversupply. Dalian’s port authorities had expanded storage capacity by 20% in early 2025, but utilization rates now approach 90%, raising concerns about logistical bottlenecks and further price suppression.

Market Drivers: Crude Oil, Currencies, and Policy Risks

1. Crude Oil Influence: Both palm and soy oil prices are tied to crude oil trends, as vegetable oils often serve as biofuel feedstocks. A $63.49/barrel WTI price in late April provided some support, but this effect has been muted by oversupply.
2. Currency Fluctuations: The Malaysian ringgit’s 0.83% appreciation against the U.S. dollar in early 2025 made palm oil more expensive for international buyers, weakening demand.
3. Trade Policies: U.S.-China trade negotiations and Brazil’s soy harvest—expected to flood global markets—add uncertainty. China’s soybean port stocks hit a 5.6 million-ton low in March 旁25, signaling potential production constraints for soy oil.

Why This Matters for Investors

The Dalian stock build-up and soy oil’s price movements highlight two critical risks for palm oil investors:
- Competitive Pricing Pressures: Soy oil’s price declines could accelerate substitution, especially if biodiesel mandates favor cheaper feedstocks.
- Storage Capacity Constraints: Dalian’s near-maximum utilization may force producers to sell at discounts, further depressing prices.

Conclusion: Navigating the Palm Oil Downturn

The palm oil market is in a precarious position. With 850,000 tons of Dalian stocks—up 41.6% in six months—and soy oil prices undercutting palm’s traditional cost advantage, traders must prepare for prolonged weakness. Key catalysts to watch include:

1. Indonesian Export Policies: If Jakarta reinstates export taxes or bans, it could curb the oversupply.
2. U.S. Biodiesel Mandates: A shift toward soy oil in biofuel production would deepen palm oil’s slump.
3. Dalian Storage Limits: If port capacity is exhausted, price discounts could intensify.

Investors should also monitor the price spread between CBOT soy oil and BMD palm oil, which at $143.17/MT in April 2025, remains a key indicator of palm oil’s competitiveness. For now, the data suggests caution: oversupply and substitution risks are too significant to dismiss.

In this environment, short-term traders might profit from short positions on DCE palm oil futures, while long-term investors should await clearer demand signals or supply-side disruptions. The palm oil market’s resilience will depend on whether it can regain its cost edge—and whether Dalian’s storage woes can be resolved before they trigger a deeper crisis.