14.07.2021 (www.thestar.com.my) - PETALING JAYA: Resilient demand from China and growing restocking activities in India should keep palm oil stockpile at low levels generally, in the coming months.

Such expectations come after June inventory levels came in below expectations of analysts, supported by higher-than-expected export numbers.

In its report to clients, Kenanga Research said June inventory levels, which was an increase of 2.8% on a month-on-month (m-o-m) basis, came in below both its and consensus’ estimates.

For July, we forecast production growth as Sabah’s production takes a breather, while Peninsular Malaysia and Sarawak’s production continue to grow, and we also expect exports to rise, the research house said.

It opined that July 2021 inventory would remain flat.

Kenanga pointed out that China with its palm oil inventory level at a three-year low should continue replenishment activities, and India should see increased exports towards the end of July from its import restriction removal.

“Moving forward, the prevailing key factors remain stockpiling activities by India and China, labour situation, movement restriction developments, supply-demand dynamics of soybean market, and biodiesel mandates, ” the research house, which kept its “neutral” call on the sector yesterday, said.

Hong Leong Investment Bank’s (HLIB) research unit meanwhile reckoned stockpile will likely remain at low levels in the coming months.

It noted that lower exports to India were more than mitigated by higher exports to China and Pakistan.

“Exports resumed on uptrend, rising by 11.8% m-o-m to 1.42 million tonnes in June, as lower exports to India were more than mitigated by higher exports to China (+47.4%) and Pakistan (+32.3%).”

“We maintain our average crude palm oil (CPO) price assumptions of RM3, 200 per tonne, for 2021 and RM2, 800 per tonne for 2022-2023, as we continue to hold the view that CPO price will trend down more noticeably in the second half of 2021.

“This will be on the back of improving supply visibility for most vegetable oils in the coming season, and limited demand growth potential for vegetable oils, ” it said.

HLIB also kept its “neutral” call on the plantation sector.

On Monday, CGS-CIMB said Malaysian palm oil stocks which rose 2.8% m-o-m to 1.61 million tonnes as at end-June was “spot on” against its forecast.

“Labour shortage issues remain unresolved and are likely to affect the second half of 2021 production, ” it said.

The research house, like others, is “neutral” on the plantation sector and is projecting palm oil stocks to rise 3% m-o-m to 1.67 million tonnes by end-July.

https://www.thestar.com.my/business/business-news/2021/07/14/palm-oil-stockpile-to-remain-low