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News Admin
 
Date
 12/02/2020
News Provider
 Nur Aisha Abd. Wahab
News Source
 Borneo Post Online
Headline
 M’sia sees lower CPO demand from major destinations

Borneo Post Online (12/02/2020) - KUCHING: Malaysia’s export demand for crude palm oil (CPO) remains under pressure as can be seen in January’s CPO exports dropping by 27.6 per cent year on year (y-o-y) to 1.2 million metric tonne (MT) levels.

Analysts said this was mainly driven by the sharp drop in export demand from India (by 85.3 per cent) and also China (by 44.3 per cent) y-o-y.


MIDF Amanah Investment Bank Bhd (MIDF Research) said India’s current restriction on refined palm oil and purported trade ban on Malaysian palm oil amidst diplomatic tensions between the countries will continue to put downward pressure on export demand.


“Meanwhile, we believe that the lower export demand from China was primarily due to the limited business activities arising from the outbreak of the 2019 novel coronavirus,” it said in a sector outlook yesterday.


To recall, India and China are the top two trading partners and, in aggregate, account for 37.5 per cent of total Malaysian palm oil export in 2019.


“However, this was partially moderated by the rise in Pakistan’s export demand by 112.2 per cent y-o-y to 170,600MT,” it added.


“Also, the higher domestic consumption through the implementation B30 and expectancy of lower output in Indonesia could result in tight supplies of its CPO for the global export market. This in turn could help divert buyers’ purchases of palm oil from Malaysia when there is a shortage.”


On CPO inventory, the team at Kenanga Investment Bank Bhd (Kenanga Research) saw that Malaysia’s January stockpile was at its lowest level in 31 months.


“January 2020’d CPO inventory declined further to 1.76 million. This marked the fourth consecutive monthly decline in stockpiles and its lowest level since June 2017,” it said in a separate note.


In other declines, Affin Hwang Investment Bank Bhd (AffinHwang Capital) saw that CPO production dropped for the fourth consecutive month to 1.17 million MT, down by 32.9 per cent y-o-y, partly attributable to the monsoon season and Chinese New Year holiday break.


Notably, CPO production declined throughout the country, down by 11.8, 14.9 and 11.5 per cents month on month to 560,800MT, 316,900MT and 288,100MT in Peninsular Malaysia, Sabah and Sarawak, respectively.


“We expect production to pick up again towards the second quarter as the monsoon season ends,” it highlighted. For 2020, we expect Malaysia’s CPO production to be one or two per cent lower y-o-y due to the lagged effect of the dry weather in 2019, lagged effect of lower fertiliser application and minimal new plantings of oil palm.”


Meanwhile, there was a mall chance for El Nino to make an appearance in 2020 which could CPO production.


“Based on the US National Oceanic and Atmospheric Administration climate advisory report, the tropical Pacific has remained El Nino-Southern Oscillation (ENSO)-neutral (neither El Nino or La Nina is present), and this condition could potentially continue through the Northern Hemisphere spring of 2020 and summer of 2020.


“However, there is a 25 per cent probability that El Nino could make an appearance in the spring of 2020,” AffinHwang Capital outlined.


“The ENSO cycle can greatly influence global weather, as these cycles can alter the normal weather patterns and surface temperatures, which can cause major disruption to the world’s agricultural production and supply.”


Read more at https://www.theborneopost.com/2020/02/12/msia-sees-lower-cpo-demand-from-major-destinations/



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