MARKET DEVELOPMENT
CIMB Research Maintains CPO Price Outlook At RM2,530 For 2013
CIMB Research Maintains CPO Price Outlook At RM2,530 For 2013
12/04/2013 (The Star) - CIMB Equities Research is maintaining its crude palm oil (CPO) price forecasts of RM2,530 for 2013 and RM2,700 for 2014 and also its Neutral rating for regional planters.
The research house said on Friday the emergence of biodiesel demand has created a floor price for CPO.
"There is potential upside of about US$250 per tonne (up 30%) for the CPO price, should it revert to its historical average premium over crude oil," it said.
CIMB Research said it was encouraged by the evidence presented by Dr James Fry, chairman of LMC International at Thursday's PAC seminar that the emergence of biodiesel demand has created a floor price for CPO.
Fry made six observations on the roller-coaster CPO price market in 2012.
* The price band linking palm oil with crude oil price, had survived its toughest test;
* The export tax for biodiesel in Indonesia and freight costs had reinforced the price band's floor price;
* Biodiesel (palm methyl ester) can be a very competitive fuel in Indonesia if processors passed on advantages they enjoyed via cheap feedstock costs;
* government policies created uncertainties in forecasting demand;
* palm kernel oil also traded within a price band with crude oil;
* and Indonesian seed sales statistics suggested that more palm oil estates were planted over the past few years than earlier thought.
“We agree with Dr Fry's assessment that the emergence of biodiesel demand has provided a new source of demand for palm oil and this helps establish a floor price for CPO during periods of excess supplies.
“A positive surprise for us are indications that Indonesian biodiesel plants are running at full capacities to cater to local and US biodiesel markets. But this is offset by his view of larger new palm oil plantations in Indonesia against the official figure which will translate to higher palm oil supplies from Indonesia in the coming years,” said CIMB Research.
The research house said on Friday the emergence of biodiesel demand has created a floor price for CPO.
"There is potential upside of about US$250 per tonne (up 30%) for the CPO price, should it revert to its historical average premium over crude oil," it said.
CIMB Research said it was encouraged by the evidence presented by Dr James Fry, chairman of LMC International at Thursday's PAC seminar that the emergence of biodiesel demand has created a floor price for CPO.
Fry made six observations on the roller-coaster CPO price market in 2012.
* The price band linking palm oil with crude oil price, had survived its toughest test;
* The export tax for biodiesel in Indonesia and freight costs had reinforced the price band's floor price;
* Biodiesel (palm methyl ester) can be a very competitive fuel in Indonesia if processors passed on advantages they enjoyed via cheap feedstock costs;
* government policies created uncertainties in forecasting demand;
* palm kernel oil also traded within a price band with crude oil;
* and Indonesian seed sales statistics suggested that more palm oil estates were planted over the past few years than earlier thought.
“We agree with Dr Fry's assessment that the emergence of biodiesel demand has provided a new source of demand for palm oil and this helps establish a floor price for CPO during periods of excess supplies.
“A positive surprise for us are indications that Indonesian biodiesel plants are running at full capacities to cater to local and US biodiesel markets. But this is offset by his view of larger new palm oil plantations in Indonesia against the official figure which will translate to higher palm oil supplies from Indonesia in the coming years,” said CIMB Research.