MARKET DEVELOPMENT
December’s CPO Seasonal Decline Less Pronounced in East Malaysia
December’s CPO Seasonal Decline Less Pronounced in East Malaysia
14/01/2014 (Borneo Post) - The seasonal decline in fresh fruit bunch (FFB) yields for crude palm oil (CPO) in December last year was less pronounced in East Malaysia than Peninsular Malaysia, sliding by 14 per cent and four per cent month on month (m-o-m), respectively.
Research analysts at HwangDBS Vickers Research Sdn Bhd (HwangDBS Vickers Research) noted that Malaysia’s palm oil output dropped by 10 per cent m-o-m to 1.667 million metric tonnes (MT) in December 2013, which amounted to three per cent lower than the forecasted 1.725 million MT.
Considering the year on year (y-o-y) drops had also widened since November 2013, the research house expect Malaysia’s overall January 2014 output to drop by a steeper 14 per cent m-o-m to 1.429 million MT.
According to the analysts, in December 2013, Malaysia’s palm oil export volume eased by one per cent m-o-m to 1.508 million MT, while domestic consumption unexpectedly slumped by 17 per cent m-o-m to 0.177 million MT.
“As a result, end- December 2013 stockpile of 1.985 million MT was nine per cent higher than expected. Exports were dragged by a 33 per cent m-o-m drop in shipments to India, and were only partially offset by 14 per cent m-o-m rise in shipments to China to fill the Lunar New Year demand.
“With no other major festivities to drive near term demand, we expect January14 exports to decline by 6 per cent m-o-m to 1.422 million MT, and end-January14 stockpile to settle at 1.870 million MT(-6 per cent m-o-m),” they explained.
“Except for a few compelling laggards, we believe palm oil prices and regional plantation stocks remain in correction mode. However in our view, palm oil prices may be close to bottoming,” they added.
India raised the refined edible oil import duty to 10 per cent from 7.5 per cent on 9 January 2014. The move was meant to help local refiners, who had been operating below capacity due to a flood from cheaper imports, given favourable export tax spreads in Malaysia and Indonesia.
“While we had flagged this as a risk, we believe the impact may not be significant, as only the most efficient refiners would be able to enjoy the slightly higher spreads.
“We expect some shift in Indian imports towards crude palm oil (CPO), thus eroding margins of Malaysian/ Indonesian refiners in order to compete with Indian refiners.”
Ta Securities Holdings Bhd’s research arm also shared similar sentiments, noting that, “We think there will be some switching to Malaysia, given the more favourable export tax rates versus Indonesia.
“That could partially help to boost exports to India after a rather disappointing calender year 2013 (CY13).”
On another note, Malaysia’s palm oil import (POI) from Indonesia remained very low at 24,574 million MT or 72 per cent lower y-o-y.
Kenanga Investment Bank Bhd’s research arm reckoned this to be a sign that Indonesia is committed in implementing its biodiesel plan, which spurred higher domestic palm oil usage.
This would thus curb its export and lessen the export competition with Malaysia. This is positive to CPO prices and benefits both countried in the long run, it said.
Research analysts at HwangDBS Vickers Research Sdn Bhd (HwangDBS Vickers Research) noted that Malaysia’s palm oil output dropped by 10 per cent m-o-m to 1.667 million metric tonnes (MT) in December 2013, which amounted to three per cent lower than the forecasted 1.725 million MT.
Considering the year on year (y-o-y) drops had also widened since November 2013, the research house expect Malaysia’s overall January 2014 output to drop by a steeper 14 per cent m-o-m to 1.429 million MT.
According to the analysts, in December 2013, Malaysia’s palm oil export volume eased by one per cent m-o-m to 1.508 million MT, while domestic consumption unexpectedly slumped by 17 per cent m-o-m to 0.177 million MT.
“As a result, end- December 2013 stockpile of 1.985 million MT was nine per cent higher than expected. Exports were dragged by a 33 per cent m-o-m drop in shipments to India, and were only partially offset by 14 per cent m-o-m rise in shipments to China to fill the Lunar New Year demand.
“With no other major festivities to drive near term demand, we expect January14 exports to decline by 6 per cent m-o-m to 1.422 million MT, and end-January14 stockpile to settle at 1.870 million MT(-6 per cent m-o-m),” they explained.
“Except for a few compelling laggards, we believe palm oil prices and regional plantation stocks remain in correction mode. However in our view, palm oil prices may be close to bottoming,” they added.
India raised the refined edible oil import duty to 10 per cent from 7.5 per cent on 9 January 2014. The move was meant to help local refiners, who had been operating below capacity due to a flood from cheaper imports, given favourable export tax spreads in Malaysia and Indonesia.
“While we had flagged this as a risk, we believe the impact may not be significant, as only the most efficient refiners would be able to enjoy the slightly higher spreads.
“We expect some shift in Indian imports towards crude palm oil (CPO), thus eroding margins of Malaysian/ Indonesian refiners in order to compete with Indian refiners.”
Ta Securities Holdings Bhd’s research arm also shared similar sentiments, noting that, “We think there will be some switching to Malaysia, given the more favourable export tax rates versus Indonesia.
“That could partially help to boost exports to India after a rather disappointing calender year 2013 (CY13).”
On another note, Malaysia’s palm oil import (POI) from Indonesia remained very low at 24,574 million MT or 72 per cent lower y-o-y.
Kenanga Investment Bank Bhd’s research arm reckoned this to be a sign that Indonesia is committed in implementing its biodiesel plan, which spurred higher domestic palm oil usage.
This would thus curb its export and lessen the export competition with Malaysia. This is positive to CPO prices and benefits both countried in the long run, it said.