MARKET DEVELOPMENT
US Ban on Transfat Good for Overall Palm Oil Industry
US Ban on Transfat Good for Overall Palm Oil Industry
19/06/2015 (Borneo Post) - The proposal by US to ban trans fat in its food supply has been viewed as overall positive for the palm oil industry in terms of off-take.
Of note, according to Bloomberg news, artificial trans fat will be removed from the US food supply over the next three years under a ruling by regulators that the products pose health risks that contribute to heart disease.
Maybank Investment Bank Bhd’s research arm (Maybank IB Research) in a report, pointed out that palm oil is seen as a key beneficiary as palm oil is semi-solid at room temperature and hence do not need to go through hydrogenation process, thus suitable for industrial use.
“Trans fat ban has been selectively imposed in the US before this but this nationwide ban by 2018 is definitely a welcoming news for plantation companies.
“The ban of trans fat in regions like California and New York has already seen a gradual increase in demand for palm oil in the US in recent years,” the research team said.
With the new proposal, it expected the demand for palm oil to increase by half a billion pounds a year, or 0.22 million metric tonnes per annum, based on America’s reported palm oil market size at circa 2.6 billion pound per year.
However, Maybank IB Research noted, relative to global palm oil production of circa 60 million metric tonnes per annum, the incremental demand will not likely be significant.
Hence, the research team said it does not expect a jump in crude palm oil (CPO) prices arising from this new ruling. Maybank IB Research retained its ‘neutral’ view on the sector but noted that one company with significant specialty oils and fats exposure that could directly benefit from this new ruling is IOI Corporation.
It noted, IOI Corporation, via its 100 per cent-owned Loders Crooklaan, has a 400,000 metric tonne per annum specialty oils and fats plant located in Channahon, US which is approximately an hour’s drive Chicago.
Aside from IOI Corporation, Maybank IB Research pegged top ‘buys’ on First Resources, Bumitama Agri, Genting Plantations and Sarawak Oil Palms.
Of note, according to Bloomberg news, artificial trans fat will be removed from the US food supply over the next three years under a ruling by regulators that the products pose health risks that contribute to heart disease.
Maybank Investment Bank Bhd’s research arm (Maybank IB Research) in a report, pointed out that palm oil is seen as a key beneficiary as palm oil is semi-solid at room temperature and hence do not need to go through hydrogenation process, thus suitable for industrial use.
“Trans fat ban has been selectively imposed in the US before this but this nationwide ban by 2018 is definitely a welcoming news for plantation companies.
“The ban of trans fat in regions like California and New York has already seen a gradual increase in demand for palm oil in the US in recent years,” the research team said.
With the new proposal, it expected the demand for palm oil to increase by half a billion pounds a year, or 0.22 million metric tonnes per annum, based on America’s reported palm oil market size at circa 2.6 billion pound per year.
However, Maybank IB Research noted, relative to global palm oil production of circa 60 million metric tonnes per annum, the incremental demand will not likely be significant.
Hence, the research team said it does not expect a jump in crude palm oil (CPO) prices arising from this new ruling. Maybank IB Research retained its ‘neutral’ view on the sector but noted that one company with significant specialty oils and fats exposure that could directly benefit from this new ruling is IOI Corporation.
It noted, IOI Corporation, via its 100 per cent-owned Loders Crooklaan, has a 400,000 metric tonne per annum specialty oils and fats plant located in Channahon, US which is approximately an hour’s drive Chicago.
Aside from IOI Corporation, Maybank IB Research pegged top ‘buys’ on First Resources, Bumitama Agri, Genting Plantations and Sarawak Oil Palms.