MARKET DEVELOPMENT
Government's Move Not Enough To Curb Rising CPO Inventory - HLIB
Government's Move Not Enough To Curb Rising CPO Inventory - HLIB
05/09/2014 (Bernama) - The move taken by the government to cope with rising crude palm oil (CPO) inventory and falling prices is not sufficient to boost the commodity's prices significantly higher, said Hong Leong Investment Bank (HLIB).
It said CPO prices would have to stay sufficiently low in order for biodiesel, which is the main catalyst to CPO demand, to be economically viable.
"The expected record soybean and corn crops in the US will curb soybean oil prices from rebounding extensively, hence capping the near-term upside potential of CPO prices," it said.
The government has decided to exempt CPO from export taxes for September and October with possible extension until the end of the year, in an attempt to cope with rising inventory and falling prices.
The exemption from duties is expected to increase palm oil exports by 600,000 tonnes over the next two months and reduce stock levels to 1.6 million tonnes by year-end.
Besides export duties, the government is expected to make a decision on nationwide B7 biodiesel mandate by this month.
The new biodiesel mandate will take place by Dec 1, should the cabinet approve the proposal.
"We are maintaining our average CPO price projection of RM2,400 per tonne and RM2,300 per tonne for 2014 and 2015, respectively, as well as our 'underweight' stance on the sector," said HLIB.
As at 10.45 am, the Plantation index fell 68.65 points to 8,554.39 and the FBM Palm Oil index lost 51.4 points to 18,637.74
It said CPO prices would have to stay sufficiently low in order for biodiesel, which is the main catalyst to CPO demand, to be economically viable.
"The expected record soybean and corn crops in the US will curb soybean oil prices from rebounding extensively, hence capping the near-term upside potential of CPO prices," it said.
The government has decided to exempt CPO from export taxes for September and October with possible extension until the end of the year, in an attempt to cope with rising inventory and falling prices.
The exemption from duties is expected to increase palm oil exports by 600,000 tonnes over the next two months and reduce stock levels to 1.6 million tonnes by year-end.
Besides export duties, the government is expected to make a decision on nationwide B7 biodiesel mandate by this month.
The new biodiesel mandate will take place by Dec 1, should the cabinet approve the proposal.
"We are maintaining our average CPO price projection of RM2,400 per tonne and RM2,300 per tonne for 2014 and 2015, respectively, as well as our 'underweight' stance on the sector," said HLIB.
As at 10.45 am, the Plantation index fell 68.65 points to 8,554.39 and the FBM Palm Oil index lost 51.4 points to 18,637.74