BEIJING/KUALA LUMPUR, Nov 23 (Reuters) - China has cancelled orders for up to 300,000 tonnes of refined palm oil over the past month as some traders had over-booked cargoes and domestic prices remain lower than that of imports, Asian traders said on Wednesday.
The scrapped orders were for cargoes scheduled for delivery in the first quarter of 2012 when China celebrates Lunar New Year festival in late January with a week long public holiday -- a peak demand season, they said.
"It has been going on for some time, a month or so. There are really no profit margins for the Chinese importers now and they are getting out while they can. There is still time to buy later on," said a Malaysian trader dealing with China.
Benchmark palm oil futures on the Bursa Malaysia Derivatives Exchange dropped to a near two-week low of 3,128 Malaysian ringgit per tonne after the news, which signals demand could slow.
News of the cancellations come as China's factory sector shrank the most in 32 months in November, reviving worries the world's No.2 palm oil buyer may be skidding towards an economic hard landing that would weaken commodity demand.
Two Chinese traders said a major state-owned trading house had cancelled orders for some 100,000 tonnes of refined palm oil last week.
"It does not make sense to ship back palm oil as domestic prices are about 800 yuan to 1,000 yuan lower than imported price. It is better to wash out the cargo if you have not booked the vessel," said one of the traders.
But the trader added that imports in January to March next year would still be big at 500,000 tonnes each month. This year in the first quarter, China imported over 1 million tonnes, customs data show.
Malaysian traders said demand for palm oil will be strong as fears that a brewing La Nina weather could worsen the monsoon rains and limit production, spurring China to order fast to avoid another upswing in prices.
"It really depends on Dalian market prices because the prices have come under pressure from the global economic sentiment and the fact that China has been selling its state reserves to bring down prices," said another Malaysian trader.
"But with running down the reserves, there is an opportunity for demand to rise as China has to restock," the trader added. (Editing by Himani Sarkar)