26/05/2012 (Fox Business) - Crude palm oil prices may rise from current levels and hover around MYR3,200 a metric ton over the next two months, buoyed by tight stocks and Ramadan demand, IOI Corp. group executive director Lee Yeow Chor said Friday.

"Ramadan-induced demand will boost prices," he said at the firm's sprawling plantation estate in Johor.

Expectations of improved holiday demand come as production growth remains weak following a bumper crop last year that boosted Malaysia's 2011 CPO output to a record 18.9 million tons.

Lee tipped production of fresh palm fruit bunches to rise only 5% in the 2011 fiscal year that ends June 30, from 3.30 million tons in FY2010.

"Palm yields have not been that great for the first few months this year," Lee said.

IOI Corp., the second-largest listed plantation firm by acreage in Malaysia, has an annual refining capacity of 3.2 million tons, around 13% of the country's total capacity of 24 million tons, making the company vulnerable to Indonesia's changes to its export tax on refined palm oil.

Indonesia last year slashed export taxes on refined palm oil to boost investment in downstream processing and to help secure sufficient and affordable domestic supplies of CPO.

Lee said IOI will build a refinery in Indonesia when its output there hits 500,000 tons annually, likely sometime in the next three years, joining other foreign firms doing so because of higher margins.

He declined to give a projected capacity for the processing plant.

With a market valuation of MYR35 billion ($11 billion), family-run IOI ventured into Indonesia in 2007 and now has around 85,000 hectares in Kalimantan province.

It has planted more than 2,200 hectares in Kalimantan and intends to plant 10,000 hectares a year over the next three years, Lee said.