MARKET DEVELOPMENT
Malaysia, Indonesia Biodiesel Policy To Stabilise CPO Price
Malaysia, Indonesia Biodiesel Policy To Stabilise CPO Price
13/11/2013 (Borneo Post) - Figures for October 2013 in the plantation sectors continue to support further strengthening of crude palm oil (CPO) prices, highlights analysts at RHB Research Institute Sdn Bhd (RHB Research).
Analysts Alvin Tai and Hoe Lee Leng in an update on the sector noted that inventory, which was still at comfortable levels, could climb a little more before year-end.
“We maintain that sector fundamentals are improving, with stronger palm oil prices and flat production costs expected next year,” they outlined in the update.
“We continue to see upside risk to our price assumption for CY14, currently at RM2,600 per tonne.” This was on the back of Malaysia’s palm oil inventory rising 3.5 per cent month on month (m-o-m) to 1.845 million tonnes for the period.
Tai and Hoe said some marginal increase during the high crop season could not be ruled out but they believed ending inventory will remain sharply below the end-CY12 level of 2.628 million tonnes.
The onset of the low production season, steady exports and strong local consumption will keep inventory levels relatively low, they said.
Meanwhile, RHB Research noted that production would likely have peaked, rising by some by 60,100 tonnes or 3.1 per cent m-o-m to 1.972 million tonnes, largely driven by Sabah.
November production tapered off, marking the start of the low crop season.
On the other hand, the research team at HwangDBS Vickers Research Sdn Bhd (HwangDBS Research) noted that there was “too much, too soon” for the rise of planter indexes regionally.
“In October 2013, KL Plantation Index rose by three per cent; primarily in reaction to a likewise 10 per cent jump in Malaysian Derivatives Exchange palm oil prices; while Singapore Exchange and Indonesian Exchange-listed planters recovered by seven per cent and six per cent respectively, over the same month,” it forewarned.
“Recent share price gains now limit the upside potential of some of our picks.”
On the other side of the world, the European Union anti-dumping tariff applied on Indonesian palm oil-based biodiesel is expected to shave some 0.3 million metric tonnes of Indonesian biodiesel exports in FY14.
“However, offsetting this, we expect Indonesia’s own biodiesel and palm oil consumption for energy
usage to expand by circa 1.3 million metric tonnes next year, as we impute the government’s new, higher mandatory blends,” it predicted.
“This, combined with the global economic recovery and a drop in new planting, should reduce palm oil inventories and support palm oil prices from next year onwards.”
Looking at fertilisers, RHB Research noted that plantation companies were in the midst of locking in fertiliser prices for the first half of the calendar year 2014 consumption and early indications suggest that prices could be lower by 10 per cent from 2013 levels.
“We believe the real number could be lower, as the free-on-board (FOB) composite fertiliser price in September was already some 20 per cent lower year on year.
“Taking the strength of the US dollar into consideration, prices would still have been some 15 per cent lower.”
Analysts Alvin Tai and Hoe Lee Leng in an update on the sector noted that inventory, which was still at comfortable levels, could climb a little more before year-end.
“We maintain that sector fundamentals are improving, with stronger palm oil prices and flat production costs expected next year,” they outlined in the update.
“We continue to see upside risk to our price assumption for CY14, currently at RM2,600 per tonne.” This was on the back of Malaysia’s palm oil inventory rising 3.5 per cent month on month (m-o-m) to 1.845 million tonnes for the period.
Tai and Hoe said some marginal increase during the high crop season could not be ruled out but they believed ending inventory will remain sharply below the end-CY12 level of 2.628 million tonnes.
The onset of the low production season, steady exports and strong local consumption will keep inventory levels relatively low, they said.
Meanwhile, RHB Research noted that production would likely have peaked, rising by some by 60,100 tonnes or 3.1 per cent m-o-m to 1.972 million tonnes, largely driven by Sabah.
November production tapered off, marking the start of the low crop season.
On the other hand, the research team at HwangDBS Vickers Research Sdn Bhd (HwangDBS Research) noted that there was “too much, too soon” for the rise of planter indexes regionally.
“In October 2013, KL Plantation Index rose by three per cent; primarily in reaction to a likewise 10 per cent jump in Malaysian Derivatives Exchange palm oil prices; while Singapore Exchange and Indonesian Exchange-listed planters recovered by seven per cent and six per cent respectively, over the same month,” it forewarned.
“Recent share price gains now limit the upside potential of some of our picks.”
On the other side of the world, the European Union anti-dumping tariff applied on Indonesian palm oil-based biodiesel is expected to shave some 0.3 million metric tonnes of Indonesian biodiesel exports in FY14.
“However, offsetting this, we expect Indonesia’s own biodiesel and palm oil consumption for energy
usage to expand by circa 1.3 million metric tonnes next year, as we impute the government’s new, higher mandatory blends,” it predicted.
“This, combined with the global economic recovery and a drop in new planting, should reduce palm oil inventories and support palm oil prices from next year onwards.”
Looking at fertilisers, RHB Research noted that plantation companies were in the midst of locking in fertiliser prices for the first half of the calendar year 2014 consumption and early indications suggest that prices could be lower by 10 per cent from 2013 levels.
“We believe the real number could be lower, as the free-on-board (FOB) composite fertiliser price in September was already some 20 per cent lower year on year.
“Taking the strength of the US dollar into consideration, prices would still have been some 15 per cent lower.”