The Edge Markets (01/10/2020) KUALA LUMPUR (Oct 1): Palm oil prices may decline slightly towards the end of this year from the current strong level, said IOI Corp Bhd group managing director (MD) and chief executive Datuk Lee Yeow Chor.
According to his statement in IOI Corp's Annual Report 2020, Lee explained that it is due to oil palm crop production likely increasing gradually from September to November this year while the demand is expected to taper off from the high restocking activities in the major importing countries.
While the demand for palm oil has recovered from the lows during the early days of the Covid-19 pandemic, from higher exports mainly led by improved demand from India and China, Lee said the Malaysian palm oil inventory dropped to 1.7 million metric tonnes (MT) in July 2020, the lowest in three years as a result of lower supply affected by heavy rain.
"This situation, coupled with higher exports, increased palm oil price significantly from around RM2,100 per MT in May to above RM2,800 per MT in August this year," he added.
Additionally, Lee said the management has embarked on a five-year plan, which was introduced in March this year, to provide a clear direction for the group to progress from a cost-competitive palm oil producer to a high value-added diversified palm-based products producer which will increase its resilience and competitiveness in the future.
One component of its five-year plan is the group aims to increase plantation oil yield by at least 15% through utilising its high-yielding planting materials which include clonal palms as well as employing best agricultural and labour management practices.
The group seeks to reduce dependency on manual labour and optimise the plantation workers' productivity through the implementation of various estate mechanisation and plantation digitalisation programmes, and that the group is aiming to complete mechanisation across all its Malaysian estates within three years, said Lee.
Lee noted that the group is aiming to diversify planting of crops away from full reliance on oil palm to other crops such as coconut and kenaf to limit the group's exposure to palm oil price volatilities, as well as to increase the non-crude palm oil income by converting oil palm by-products and processing waste into value-added products at competitive cost.
The group is also looking to increase the oleochemical sub-segment's profit contribution by RM100 million through organic expansion and new products applications.
"The new 110,000 MT per annual capacity oleochemical plant in Prai, Penang which commenced construction during the second half of 2019 will spearhead our organic expansion," Lee added.
At 11.01am, shares in IOI Corp were one sen or 0.22% lower at RM4.45, valuing the company at RM27.95 billion.
Read more at https://www.theedgemarkets.com/article/palm-oil-prices-may-decline-slightly-end2020-crop-production-rises-says-ioi-corp-group-md