MARKET DEVELOPMENT
Plantation Sector To Receive Boost in Demand for CPO
Plantation Sector To Receive Boost in Demand for CPO
05/08/2013 (Borneo Post) - A rise in demand for crude palm oil (CPO), coupled with declining palm oil inventory, is expected to help sustain palm oil prices at above RM2,000 per metric tonne (pmt) levels.
In noting this, MIDF Amanah Investment Bank Bhd’s research division (MIDF Research) affirmed that China as a growing country played a major role in sustaining CPO price.
“China’s economic health is important because it is the largest palm oil consuming nation. Between 2008 to June 2013, China imported an average of 311,127 of palm oil per month, accounting for 22.3 per cent of Malaysia’s total exports of palm products.”
Moreover, MIDF Research also expect stronger demand from India to maintain CPO price. According to the Mumbai-based trade body, Solvent Extractors Association, the imports of refined palm oil by India this year up to October 2013 is expected to surge 68.8 per cent year-on-year (y-o-y) to 2.7 million metric tonnes (mmt).
“This increasing import trend of refined palm oil was mainly due to the narrowing spread between CPO and refined palm oil prices. The spread has recently dropped to around US$5pmt compared to US$30 to US$40 per metric tonne a year ago.”
MIDF Research further highlighted that, “In addition, we also foresee a higher demand from EU countries as palm oil will no longer be banned, by France in particular. The so-called ‘Nutella tax’ suggested by a French senator last year which would quadruple the tax on palm oil has negatively affect the demand for palm products during the year.
“However, considering the importance of palm oil production towards the Malaysian economy, French Prime Minister, Jean-Marc Ayrault, has recently made an assurance that the French government will not discriminate palm oil products against other vegetable oils.
“We believe this move will help to fix the misconceptions on palm products among the Europeans, and therefore help palm oil to gain greater market acceptance in Europe.”
“We believe in the immediate term, higher export figures particularly from India, US and EU countries will offset lower demand from China and help CPO price to strengthen.
“We expect the slowing China’s economic growth, increase in soybean supply, and narrowing discount of palm oil to soybean, to dampen the recovery of CPO price in 2H13. Therefore, we do not foresee a major upward spike in CPO price over the next five months.”
In noting this, MIDF Amanah Investment Bank Bhd’s research division (MIDF Research) affirmed that China as a growing country played a major role in sustaining CPO price.
“China’s economic health is important because it is the largest palm oil consuming nation. Between 2008 to June 2013, China imported an average of 311,127 of palm oil per month, accounting for 22.3 per cent of Malaysia’s total exports of palm products.”
Moreover, MIDF Research also expect stronger demand from India to maintain CPO price. According to the Mumbai-based trade body, Solvent Extractors Association, the imports of refined palm oil by India this year up to October 2013 is expected to surge 68.8 per cent year-on-year (y-o-y) to 2.7 million metric tonnes (mmt).
“This increasing import trend of refined palm oil was mainly due to the narrowing spread between CPO and refined palm oil prices. The spread has recently dropped to around US$5pmt compared to US$30 to US$40 per metric tonne a year ago.”
MIDF Research further highlighted that, “In addition, we also foresee a higher demand from EU countries as palm oil will no longer be banned, by France in particular. The so-called ‘Nutella tax’ suggested by a French senator last year which would quadruple the tax on palm oil has negatively affect the demand for palm products during the year.
“However, considering the importance of palm oil production towards the Malaysian economy, French Prime Minister, Jean-Marc Ayrault, has recently made an assurance that the French government will not discriminate palm oil products against other vegetable oils.
“We believe this move will help to fix the misconceptions on palm products among the Europeans, and therefore help palm oil to gain greater market acceptance in Europe.”
“We believe in the immediate term, higher export figures particularly from India, US and EU countries will offset lower demand from China and help CPO price to strengthen.
“We expect the slowing China’s economic growth, increase in soybean supply, and narrowing discount of palm oil to soybean, to dampen the recovery of CPO price in 2H13. Therefore, we do not foresee a major upward spike in CPO price over the next five months.”