MARKET DEVELOPMENT
UPDATE 1-Palm Prices Seen At 6-Yr Lows if Biodiesel Demand Stays Weak-Analyst Fry
UPDATE 1-Palm Prices Seen At 6-Yr Lows if Biodiesel Demand Stays Weak-Analyst Fry
* Malaysia palm stocks to drop below 1.6 million tonnes in Q2
* But stockpiles in No.2 palm producer to climb by year end
* Indonesia's zero CPO export tax crimps biodiesel blending (Adds comments, graphics, other details)
05/03/2015 (Reuters) - Malaysian crude palm oil prices will average 2,260 ringgit a tonne in the first half of 2015, but may drop to more than six-year lows later in the year if demand from the biodiesel sector does not pick up, leading industry analyst James Fry said.
Benchmark palm prices sank almost 15 percent in 2014, partly dragged by a crude oil rout that made palm an unattractive option for blending into biodiesel.
"Until now many do not realise how much high crude prices have underpinned the palm sector," said Fry, chairman of commodities consultancy LMC International.
"I am sorry to be a bearer of bad news, but the truth is that today you face lower crude prices and no export taxes," Fry told an industry conference at Kuala Lumpur on Wednesday.
Dubbing it a year of two halves for prices, Fry said palm could drop to an average of 1,770 ringgit ($487) per tonne in the second half - which would be the lowest since early 2009.
The forecast assumes Brent crude prices at current levels of $60 a barrel.
Thomas Mielke, editor of Hamburg-based newsletter Oil World, has however said the industry must stop looking at mineral oil prices as an indicator for edible oil market.
Brent has come off near six-year lows hit in January, but prices are still down about 50 percent from June 2014 highs, weighing on demand for palm from the biofuels sector.
The removal of Indonesian crude palm oil (CPO) export taxes from October has further crimped biodiesel blending in the top oil palm grower as it created a sudden loss of over $50 for local biodiesel producers, Fry said.
Indonesian refiners were able to benefit from the export tariff as they could deduct the tax amount from CPO cash prices, but with zero tax there is no discount available to them.
The Southeast Asian nation, which fixes export taxes on a monthly basis, offers duty-free exports if CPO prices average below $750 during the previous the month.
"Export taxes have been crucial in taking surplus CPO off the market, by making biodiesel exports profitable many times in 2012-14," Fry said.
The analyst expects palm stocks in Malaysia, the second-biggest producer of the tropical oil, to drop below 1.6 million tonnes in the second quarter but climb towards the year end.
($1 = 3.6365 ringgit)
* But stockpiles in No.2 palm producer to climb by year end
* Indonesia's zero CPO export tax crimps biodiesel blending (Adds comments, graphics, other details)
05/03/2015 (Reuters) - Malaysian crude palm oil prices will average 2,260 ringgit a tonne in the first half of 2015, but may drop to more than six-year lows later in the year if demand from the biodiesel sector does not pick up, leading industry analyst James Fry said.
Benchmark palm prices sank almost 15 percent in 2014, partly dragged by a crude oil rout that made palm an unattractive option for blending into biodiesel.
"Until now many do not realise how much high crude prices have underpinned the palm sector," said Fry, chairman of commodities consultancy LMC International.
"I am sorry to be a bearer of bad news, but the truth is that today you face lower crude prices and no export taxes," Fry told an industry conference at Kuala Lumpur on Wednesday.
Dubbing it a year of two halves for prices, Fry said palm could drop to an average of 1,770 ringgit ($487) per tonne in the second half - which would be the lowest since early 2009.
The forecast assumes Brent crude prices at current levels of $60 a barrel.
Thomas Mielke, editor of Hamburg-based newsletter Oil World, has however said the industry must stop looking at mineral oil prices as an indicator for edible oil market.
Brent has come off near six-year lows hit in January, but prices are still down about 50 percent from June 2014 highs, weighing on demand for palm from the biofuels sector.
The removal of Indonesian crude palm oil (CPO) export taxes from October has further crimped biodiesel blending in the top oil palm grower as it created a sudden loss of over $50 for local biodiesel producers, Fry said.
Indonesian refiners were able to benefit from the export tariff as they could deduct the tax amount from CPO cash prices, but with zero tax there is no discount available to them.
The Southeast Asian nation, which fixes export taxes on a monthly basis, offers duty-free exports if CPO prices average below $750 during the previous the month.
"Export taxes have been crucial in taking surplus CPO off the market, by making biodiesel exports profitable many times in 2012-14," Fry said.
The analyst expects palm stocks in Malaysia, the second-biggest producer of the tropical oil, to drop below 1.6 million tonnes in the second quarter but climb towards the year end.
($1 = 3.6365 ringgit)