8/7/06 (The Star)   -  PETALING JAYA: The spot price of crude palm oil (CPO) is poised to hit the RM1,500-per-tonne mark “soon”, given the potential surge in demand as more palm-based biodiesel plants are set to start operations late this year and in 2007.

The CPO price had been stagnating in the first half this year, averaging RM1,400 a tonne, unchanged from last year. 

However, it has been on the rise since early this month.

Yesterday, spot CPO July South finished at RM1,450 a tonne, up RM5 from RM1,445 a tonne previously, buoyed by strong performance of soybean overnight on the Chicago Board of Trade.

Commodity analysts told StarBiz that most biodiesel operators were beginning to replenish raw material supply (i.e. CPO) in preparation for biodiesel production.

They said the long-awaited development was expected to generate further excitement in plantation companies, many of which were setting up biodiesel plants in Malaysia and abroad.

 
This positive sentiment was also reflected on Bursa Malaysia’s top gainers list yesterday, with IOI Corp Bhd gaining 10 sen to RM15.00, Kulim Bhd up 18 sen to RM3.60, Kuala Lumpur Kepong Bhd (KLK) adding 20 sen to RM10.50 and newly listed Rimbunan Sawit Bhd rising 16 sen to RM1.28.

Analysts said share prices of plantation groups like IOI, KLK, PPB Oil Palms Bhd and Asiatic Development Bhd had appreciated 51% to 91% and outperformed the KL Composite Index by 46% to 86% since May 31 last year.

HLG Research in its recent note had projected a gradual increase in CPO prices, from an average RM1,430 a tonne this calendar year to RM1,550 next year and RM1,600 in 2008.

Contrary to general market expectations, the brokerage is of the view that the greatest mover for CPO price is its supply. In the past, while demand remained constant, prices could surge beyond or close to RM2,000 per tonne simply because of supply disruption. Examples included the Asia Rust in 2003/2004 and the severe El Nino weather phenomenon in 1997/98.

M.R. Chandran, honorary member of Roundtable on Sustainable Palm Oil, an industry grouping, said CPO prices were set to rise in the second half.

Furthermore, the lower CPO production forecast of 15.1 million tonnes this year – after seven years of uninterrupted production uptrend – was also expected to ease the pressure of higher palm oil carry-over stocks.

Other encouraging developments include China’s abolishment of palm oil import quota, trans-fatty acids ruling in the United States and increasing global demand.