MARKET DEVELOPMENT
Analysts Expect Malaysia, Indonesia's Biodiesel Policy To Stabilise CPO Prices
Analysts Expect Malaysia, Indonesia's Biodiesel Policy To Stabilise CPO Prices
12/11/2013 (Bernama) - Analysts are in consensus that biodiesel policy in Malaysia and Indonesia will stabilise crude palm oil (CPO) prices going forward.
RHB Research said Indonesian national oil company Pertamina recently concluded its tender for six million tonnes of biodiesel, which received support from all major players, and is anticipated to remove the downside for palm oil prices.
It said Malaysia, on the other hand, will be raising its biodiesel blend from five per cent currently to seven per cent in December.
"It is likely that biodiesel has been responsible for the strong local consumption in Malaysia," it said in a research note Tuesday.
Hong Leong Investment Bank Research in a separate note said while biodiesel policy in Indonesia and Malaysia would set a floor to CPO prices, it does not anticipate a strong price recovery next year as palm oil prices need to stay sufficiently low vis-a-vis crude oil prices in order to sustain the economic viability of biodiesel.
Another downside factor is the higher palm oil output from Indonesia on the back of heavy new planting in 2008-2011, it said, adding the current high soy/corn price ratio suggests that South America may register another round of record high soybean planting in 2013/14.
Meanwhile, HwangDBS Vickers in another note said it has cut this year's import volume from Indonesia by 24 per cent, given the higher refining capacity and narrower price discount.
"We forecast end-November palm oil stockpile to recover towards 1.9 million metric tonnes, followed by a further uptick towards 1.92 million metric tonnes by end of the year. They are six per cent and 10 per cent lower than our previous forecast, mainly on account of lower imports," it said.
Kenanga Research anticipates demand from exports would slip five per cent month-on-month to 1.58 million metric tonnes due to lack of major festivals in the near term and lower demand from the northern hemisphere which is getting colder.
Nevertheless, it said, CPO prices should be supported by a potential ban by the United States' Food and Drug Administration on trans fats, a weak ringgit and strong crude oil prices.
RHB Research and Kenanga Research have maintained a "neutral" view on the plantation sector while Hong Leong Investment Bank Research has kept its "underweight" recommendation.
RHB Research said Indonesian national oil company Pertamina recently concluded its tender for six million tonnes of biodiesel, which received support from all major players, and is anticipated to remove the downside for palm oil prices.
It said Malaysia, on the other hand, will be raising its biodiesel blend from five per cent currently to seven per cent in December.
"It is likely that biodiesel has been responsible for the strong local consumption in Malaysia," it said in a research note Tuesday.
Hong Leong Investment Bank Research in a separate note said while biodiesel policy in Indonesia and Malaysia would set a floor to CPO prices, it does not anticipate a strong price recovery next year as palm oil prices need to stay sufficiently low vis-a-vis crude oil prices in order to sustain the economic viability of biodiesel.
Another downside factor is the higher palm oil output from Indonesia on the back of heavy new planting in 2008-2011, it said, adding the current high soy/corn price ratio suggests that South America may register another round of record high soybean planting in 2013/14.
Meanwhile, HwangDBS Vickers in another note said it has cut this year's import volume from Indonesia by 24 per cent, given the higher refining capacity and narrower price discount.
"We forecast end-November palm oil stockpile to recover towards 1.9 million metric tonnes, followed by a further uptick towards 1.92 million metric tonnes by end of the year. They are six per cent and 10 per cent lower than our previous forecast, mainly on account of lower imports," it said.
Kenanga Research anticipates demand from exports would slip five per cent month-on-month to 1.58 million metric tonnes due to lack of major festivals in the near term and lower demand from the northern hemisphere which is getting colder.
Nevertheless, it said, CPO prices should be supported by a potential ban by the United States' Food and Drug Administration on trans fats, a weak ringgit and strong crude oil prices.
RHB Research and Kenanga Research have maintained a "neutral" view on the plantation sector while Hong Leong Investment Bank Research has kept its "underweight" recommendation.