13/06/2012 (Bernama) - Malaysian palm oil refiners can expect more headwinds in the third quarter of the year as a significant increase is anticipated in Indonesia's refining capacity, says HwangDBS Vickers Research.

It said palm oil processors in Indonesia were expected to consume more of their home-grown commodity in the third quarter and this would progressively deplete inventories.

"For this reason, refining capacity utilisation in Malaysia could drop in the near-term and reverse the inventory downtrend observed thus far," it said in a research note.

On Malaysia's crude palm oil (CPO) production, it said May's output of 1.383 million tonnes was below the research houses's forecast of 1.67 million tonnes.

However, its said stocks were expected to grow 26 per cent in June to 1.746 million tonnes in anticipation of yield recovery in fresh fruit bunches.