11/01/2018 (New Straits Times Online) - KUALA LUMPUR: Hong Leong Investment Bank (HLIB) expects average crude palm oil (CPO) to be at about RM2,500 per tonne this year.
In a research note, HLIB said it had maintained a “neutral” call for the plantation sector due to lack of strong demand catalyst for palm oil.
“While La Nina and the government’s recent move to suspend CPO export taxes will lend support to near-term CPO prices, these are just short-term catalyst.”
HLIB added that the catalyst for the CPO prices include revisit of weather uncertainties, which could result in supply distortion. Hence it will boost prices of edible oil.
“We believe the current stockpile will likely ease from January 2018 due to low production cycle and Malaysian government’s recent move to suspend CPO export taxes for three months.
“Hence, it will encourage CPO exports from Malaysia to price sensitive CPO consuming countries such as China and India, which collectively accounted to23.8 per cent of Malaysia’s CPO exports in 2017.”
CPO production rose 15 per cent to 19.9 million tonnes in 2017 from 17.3 million tonnes in 2016, in the absence of El Nino.
On the risk affecting CPO prices, the research house said higher-than-expected soybean yield and soybean planting would result in lower prices.
Among other risks include, backtracking of biodiesel mandate in Indonesia, imposition of higher import duty on CPO by India and escalating production cost.
Public Investment Bank said Malaysian palm oil sector in 2017 recorded 2.73 million metric tonne of inventory, the highest level in 25 months.
It said the high inventory level and ringgit’s strengthening could exert more pressure on prices.
However, it said the recent implementation on CPO export tax suspension could boost export.s
“We expect CPO inventory to be higher in second half this year when the high production season kicks in.”
PublicInvest said Malaysia’s CPO exports grew 3.2 per cent in 2017 to 16.5 million metric tonne, attributed to stronger growth led by China and Pakistan.
The biggest buyers in terms of export volume by destination were India, followed by Europe and China, recording 12.2 per cent, 12 per cent and 11.9 per cent, respectively.
It said the Netherlands was also the biggest palm oil exported destination, making up 50 per cent of Europe volume due to Rotterdam’s large downstream manufacturing base.
MIDF Research, meanwhile, maintained its palm oil price forecast of RM2,900 per tonne this year, in view of improved demand outlook.
“The supply growth may not be fully realised due to ongoing labour shortage and the high replanting activity planned by major plantation companies,” it said.