08/01/2013 (The Star) - Crude palm oil prices are expected to rise on higher demand in the second half of the year as inventories get drawn down, said Standard Chartered Bank head of commodities research Hsi Han Pin.

“Some will perform. Others won't do as well. But overall, demand will be very strong in the next two years. In the short term, there will be a few highs with good progression in the first half of this year,” he said.

He offered Indonesia as an example where the potential for market expansion may be hindered as supply fails to meet overwhelming demand in the long term.

“Prices will remain strong,” he said at a global research briefing.

The bank expects an average price of RM2,900 per tonne for the first half of this year. Hsi reckons that the first half of this year will show good progress, stabilising after the second quarter as inventories get drawn down due to the discount between palm and soy oils.

In most cases, both oils are substitutable for the other, therefore, users will opt for the former as it is the cheaper alternative.

Analysts had also pointed out that inventories would peak in Nov 2012 but stay high at above two million tonnes throughout the first quarter of this year, thus limiting price upside.

As for gold, Hsi seconded the opinion that the commodity's price will continue to rise due to the quantitative easing of central banks.