MARKET DEVELOPMENT
Demand for CPO Likely to be Resilient, Says Dealer
Demand for CPO Likely to be Resilient, Says Dealer
02/01/2014 (Business Times) - The demand for crude palm oil (CPO) is expected to be resilient this year, with the price averaging RM2,600 a tonne.
This will be aided by the government's biodiesel five per cent blend (B5) programme.
The programme, which involves a blend of five per cent palm oil-based biodiesel and 95 per cent petroleum-based diesel, is expected to slash CPO inventory levels by 500,000 tonnes a year.
Phillip Futures Derivative Sdn Bhd dealer David Ng said there has been a concerted effort by Indonesia and Malaysia to establish renewable mandates for biodiesel as a measure to curb fuel imports.
"On the local front, we are looking at the implementation of the B5 programme by March, which will potentially generate additional demand and provide a floor price for CPO."
He said Phillip Futures Derivative has projected CPO prices to continue an upward trend until the second quarter in light of tighter supplies and better demand.
"However, as we move towards the second half, the prices will trade on a low range of between RM2,400 and RM2,600, in view of additional supplies in the market which will raise the stock level in the country."
Ng said the narrowing of palm oil and soya oil spread could be a short-term concern as consumers from China may opt for soyabean when prices are attractive.
On the supply side, he said, production for both Malaysia and Indonesia will most likely be on the high side and will potentially weigh on prices.
However, the additional biodiesel demand could absorb the excess supply, thus balancing stock level in the market.
The government has identified CPO and rubber under its National Key Economic Areas to deliver RM230.9 billion in gross national income by 2020, to be achieved through eight Entry Point Projects.
Ng said based on recent the Economic Transformation Programme annual report, most measures have recorded successful results.
"We have seen replanting efforts to replace ageing trees in order to generate an overall higher yield for the country. Furthermore, oil extraction rate has also improved."
One of the exciting issues for the CPO sector is the establishment of the Malaysian Sustainable Palm Oil, the country's own sustainable palm oil standard.
Ng said the introduction of local standards, on top of the existing international sustainability framework designed by the Roundtable on Sustainable Palm Oil, will enhance the industry.
This will be aided by the government's biodiesel five per cent blend (B5) programme.
The programme, which involves a blend of five per cent palm oil-based biodiesel and 95 per cent petroleum-based diesel, is expected to slash CPO inventory levels by 500,000 tonnes a year.
Phillip Futures Derivative Sdn Bhd dealer David Ng said there has been a concerted effort by Indonesia and Malaysia to establish renewable mandates for biodiesel as a measure to curb fuel imports.
"On the local front, we are looking at the implementation of the B5 programme by March, which will potentially generate additional demand and provide a floor price for CPO."
He said Phillip Futures Derivative has projected CPO prices to continue an upward trend until the second quarter in light of tighter supplies and better demand.
"However, as we move towards the second half, the prices will trade on a low range of between RM2,400 and RM2,600, in view of additional supplies in the market which will raise the stock level in the country."
Ng said the narrowing of palm oil and soya oil spread could be a short-term concern as consumers from China may opt for soyabean when prices are attractive.
On the supply side, he said, production for both Malaysia and Indonesia will most likely be on the high side and will potentially weigh on prices.
However, the additional biodiesel demand could absorb the excess supply, thus balancing stock level in the market.
The government has identified CPO and rubber under its National Key Economic Areas to deliver RM230.9 billion in gross national income by 2020, to be achieved through eight Entry Point Projects.
Ng said based on recent the Economic Transformation Programme annual report, most measures have recorded successful results.
"We have seen replanting efforts to replace ageing trees in order to generate an overall higher yield for the country. Furthermore, oil extraction rate has also improved."
One of the exciting issues for the CPO sector is the establishment of the Malaysian Sustainable Palm Oil, the country's own sustainable palm oil standard.
Ng said the introduction of local standards, on top of the existing international sustainability framework designed by the Roundtable on Sustainable Palm Oil, will enhance the industry.