A strong push by the Governmen t for B5 could translate into domestic palm oil stock s being reduced to below 1million tonnes
as well as provide a floor price at RM2,000 per tonne.

01/08/2014 (The Star) - The high volume of crude palm oil (CPO) inventory carried forward from the previous year, coupled with the industry’s expectation of higher crop production going forward, have resulted in the bearish sentiment of CPO prices, said IJM Plantation CEO and managing director Joseph Tek.

He said for financial year 2014 (FY14), the average selling prices per tonne hovered around RM2,200 to RM2,400.

“It only started to break the RM2,500 level towards the end of the year following the Indonesian government’s announcement of its commitment to push for higher consumption of palm-based biodiesel,” he said in IJM Plantation’s annual report for its year ended March 31, 2014, released yesterday.

The palm oil-based B5 biodiesel programme, which is a blend of 5% palm methyl ester and diesel, began on June 1 2011, with the fuel made available at selected petrol kiosks.

The implementation of B5 in other regions in the peninsula as well as in Sabah and Sarawak as part of the planned nationwide coverage is being staggered by the government.

A strong push by the Malaysian government for B5 could translate into domestic palm oil stocks being reduced to below 1 million tonnes as well as provide a floor price at RM2,000 per tonne.

In June, the Malaysian Palm Oil Board reported that palm oil stocks had dropped to 1.66 million tonnes from 1.84 million tonnes in May.

The biodiesel policy is also something that is being mulled in Indonesia.

In a July 17 report, PT AmCapital Indonesia analyst Viviet S Putri said she expected the Indonesian government’s mandatory policy for a 10% palm oil biodiesel blend to be the key short-term catalyst for CPO price to strengthen.

“Realisation of palm oil absorption by biodiesel this year is expected to rise to two million to 2.5 million tonnes from 1 million tonnes in the previous year. Unfortunately until now, the policy is merely a subject of discourse and has not been implemented by all companies,” she said.

Meanwhile, IJM Plantation chairman Tan Sri Wong See Wah said that the group anticipated another challenging year in 2015 as uncertainty in the global trading environment continued.

“Some market analysts have projected a bullish outlook against the backdrop of tight supply arising from weather related factors linked to the El Nino phenomenon while others are more bearish due to scepticism relating to the off-take in palm biodiesel sector,” he said.

For the fourth quarter to March 31, 2014, IJM Plantation’s net profit was up 136.07% to RM52.41mil while revenue was up 39.15% to RM188.02mil.

For the financial year, net profit was down 25.87% to RM88.64mil on the back of a 33.05% increase in revenue to RM646.98mil.

The higher revenue came from the Indonesian operations and reduction in closing inventories while the lower profit was due to the implementation of the minimum wage and escalation in other cost components.

Wong expected the group’s profitability level for the coming year to be satisfactory, despite the growing pressure in the cost of production.

As at March 31, IJM Plantation’s total plantation land in its Malaysian operations stood at 29,140ha, of which 87%, or 25,343ha, are planted with oil palms.

From the total planted area, about 92% are mature while the remaining 8% of the area are at the immature stage.

The total planted area of the group’s Indonesian operations increased by 9% to 30,046 ha while its mature area increased to 36% compared with 14% in the previous year.