MARKET DEVELOPMENT
Moves Won’t Hike CPO Prices
Moves Won’t Hike CPO Prices
30/10/2014 (The Star) - The implementation of higher biodiesel mandate to B7 and the imposition of zero duty on CPO exports from September to December are positive measures to reduce rising palm oil stocks, but they will not drive up crude palm oil (CPO) prices significantly.
Analysts expect the B7 biodiesel (blending of 7% palm methyl ester with 93% diesel fuel) programme would help to boost local biodiesel demand to 448,000 tonnes per year from 155,000 tonnes in 2013, assuming Malaysia’s subsidised transport sector consumes about 6.4 million tonnes of diesel a year.
Hence, the additional biodiesel consumption will ease the country’s palm oil stockpile by about 14% based on last month’s inventory of 2.09 million tonnes.
For B5 biodiesel, it was envisaged that some 500,000 tonnes of CPO per year will be taken out of the domestic stockpile while for B7, it was 700,000 tonnes.
PublicInvest Research (PIVB) said in its latest sector update that the B7 biodiesel programme was a positive move as it would ramp up domestic consumption and potentially reduce petrol subsidies.
“It was a wise action but ‘not at the right time’,’’ PIVB said, adding that “we doubt its (biodiesel production) viability as the current oil prices have fallen by more than 15% over the last two months. It is cheaper than the biodiesel processing costs.”
The research unit also expected stiffer competition for Malaysian CPO exporters starting this month as Indonesia had also imposed zero-export tax policy as October’s reference price of US$640 per tonne was below the tariff structure minimum price of US$750 per tonne.
Despite the B7 implementation, Hong Leong Investment Bank in its report said the CPO price would unlikely recover significantly from the current level given the narrow price discount against soybean oil as well as the economic viability of voluntary biodiesel demand given the current low crude oil price.
The research unit, which has a “neutral” stance on the plantation sector, is maintaining its average CPO price projection at RM2,400 per tonne for 2014 and RM2,300 per tonne for 2015.
Meanwhile, CIMB Research also does not expect CPO price to move up significantly as it estimated that the B7 rollout would only raise CPO consumption by 260,000 to 390,000 tonnes per annum.
“As such we are keeping our CPO price forecasts of RM2,390 per tonne for 2014 and RM2,460 per tonne for 2015. Our neutral rating is also intact,” the research unit added.
Analysts expect the B7 biodiesel (blending of 7% palm methyl ester with 93% diesel fuel) programme would help to boost local biodiesel demand to 448,000 tonnes per year from 155,000 tonnes in 2013, assuming Malaysia’s subsidised transport sector consumes about 6.4 million tonnes of diesel a year.
Hence, the additional biodiesel consumption will ease the country’s palm oil stockpile by about 14% based on last month’s inventory of 2.09 million tonnes.
For B5 biodiesel, it was envisaged that some 500,000 tonnes of CPO per year will be taken out of the domestic stockpile while for B7, it was 700,000 tonnes.
PublicInvest Research (PIVB) said in its latest sector update that the B7 biodiesel programme was a positive move as it would ramp up domestic consumption and potentially reduce petrol subsidies.
“It was a wise action but ‘not at the right time’,’’ PIVB said, adding that “we doubt its (biodiesel production) viability as the current oil prices have fallen by more than 15% over the last two months. It is cheaper than the biodiesel processing costs.”
The research unit also expected stiffer competition for Malaysian CPO exporters starting this month as Indonesia had also imposed zero-export tax policy as October’s reference price of US$640 per tonne was below the tariff structure minimum price of US$750 per tonne.
Despite the B7 implementation, Hong Leong Investment Bank in its report said the CPO price would unlikely recover significantly from the current level given the narrow price discount against soybean oil as well as the economic viability of voluntary biodiesel demand given the current low crude oil price.
The research unit, which has a “neutral” stance on the plantation sector, is maintaining its average CPO price projection at RM2,400 per tonne for 2014 and RM2,300 per tonne for 2015.
Meanwhile, CIMB Research also does not expect CPO price to move up significantly as it estimated that the B7 rollout would only raise CPO consumption by 260,000 to 390,000 tonnes per annum.
“As such we are keeping our CPO price forecasts of RM2,390 per tonne for 2014 and RM2,460 per tonne for 2015. Our neutral rating is also intact,” the research unit added.