MARKET DEVELOPMENT
CPO Prices Look Good As Inventories Continue To Fall
CPO Prices Look Good As Inventories Continue To Fall
Down further: Stronger-than-expected
exports of crude palm oil helped to
lower stocks, which fell for the fifth
consecutive month in May.
12/06/2013 (The Star) - Crude palm oil (CPO) prices are expected to remain firm in the near term, as palm oil inventories continue to decline, buoying prices.
CIMB Research analyst Ivy Ng said stocks should fall further this month on slower output growth, matched with robust festive demand for the month of Ramadan.
“These, coupled with the positive export data for the first 10 days of June and a poor start to the US soybean planting season, are price-supportive factors. Our average CPO price forecasts of RM2,530 for 2013 and RM2,700 for 2014 and neutral' sector call remain unchanged,” she said.
Palm oil stocks in Malaysia fell for the fifth consecutive month in May to reach an 11-month low, and was 5% below CIMB Research's forecast and 2% above the Reuters poll estimate of 1.78 million tonnes.
“The stocks were lower than our forecast mainly due to the lower-than-expected palm oil output from Sabah, and stronger-than-expected exports,” Ng added.
The research house continues to recommend First Resources Ltd, Wilmar International Ltd and IOI Corp Bhd for exposure to the sector.
Maybank Investment Bank Bhd analysts Ong Chee Ting and Chai Li Shin said even though the three-month futures CPO price had risen by approximately RM200 per tonne from a month ago to RM2,453 per tonne, it believed there was room for the price to strengthen further to RM2,600 per tonne on improving fundamentals.
“The present price gap between CPO and soyoil of about US$274 (RM863) per tonne remains high as opposed to the historical seven-year average of US$177 (RM557) per tonne. Furthermore, we stand by our view that Indonesia's mature estates are likely to enter into a resting period in 2013 after two years of good harvest, which would further support the CPO price recovery,” they noted.
They said initial export estimates for the first 10 days of June by Intertek (419,000 tonnes, up 10% month-on-month) and Societe Generale de Surveillance (400,000 tonnes, an increase of 6%) were positive for the industry, in tandem with stronger CPO production anticipated from June onwards.
Kenanga Research analyst Lim Seong Chun, meanwhile, believes that the June 2013 total demand of 1.52 million tonnes should continue to stay ahead of the total supply of 1.45 million tonnes, hence depleting inventory by another 0.07 million tonnes.
“Overall, we expect the CPO price uptrend to continue at least in the short term, but prices may taper off when the high production season begins in second-half 2013. On the supply side, we have assumed only a 1% increase month-on-month in production to 1.40 million tonnes after incorporating the weak CPO production level seen in Sabah. Our assumption of flattish exports is quite conservative, as the Intertek data for the first 10 days of April's CPO exports showed an increase of 10%,” he said.
CIMB Research analyst Ivy Ng said stocks should fall further this month on slower output growth, matched with robust festive demand for the month of Ramadan.
“These, coupled with the positive export data for the first 10 days of June and a poor start to the US soybean planting season, are price-supportive factors. Our average CPO price forecasts of RM2,530 for 2013 and RM2,700 for 2014 and neutral' sector call remain unchanged,” she said.
Palm oil stocks in Malaysia fell for the fifth consecutive month in May to reach an 11-month low, and was 5% below CIMB Research's forecast and 2% above the Reuters poll estimate of 1.78 million tonnes.
“The stocks were lower than our forecast mainly due to the lower-than-expected palm oil output from Sabah, and stronger-than-expected exports,” Ng added.
The research house continues to recommend First Resources Ltd, Wilmar International Ltd and IOI Corp Bhd for exposure to the sector.
Maybank Investment Bank Bhd analysts Ong Chee Ting and Chai Li Shin said even though the three-month futures CPO price had risen by approximately RM200 per tonne from a month ago to RM2,453 per tonne, it believed there was room for the price to strengthen further to RM2,600 per tonne on improving fundamentals.
“The present price gap between CPO and soyoil of about US$274 (RM863) per tonne remains high as opposed to the historical seven-year average of US$177 (RM557) per tonne. Furthermore, we stand by our view that Indonesia's mature estates are likely to enter into a resting period in 2013 after two years of good harvest, which would further support the CPO price recovery,” they noted.
They said initial export estimates for the first 10 days of June by Intertek (419,000 tonnes, up 10% month-on-month) and Societe Generale de Surveillance (400,000 tonnes, an increase of 6%) were positive for the industry, in tandem with stronger CPO production anticipated from June onwards.
Kenanga Research analyst Lim Seong Chun, meanwhile, believes that the June 2013 total demand of 1.52 million tonnes should continue to stay ahead of the total supply of 1.45 million tonnes, hence depleting inventory by another 0.07 million tonnes.
“Overall, we expect the CPO price uptrend to continue at least in the short term, but prices may taper off when the high production season begins in second-half 2013. On the supply side, we have assumed only a 1% increase month-on-month in production to 1.40 million tonnes after incorporating the weak CPO production level seen in Sabah. Our assumption of flattish exports is quite conservative, as the Intertek data for the first 10 days of April's CPO exports showed an increase of 10%,” he said.