Low stockpile to support CPO price
11.04.2018 (The Star Online) - PETALING JAYA: The local palm oil stockpile will likely ease further to hit the two-million-tonne mark this month buoyed by a stronger export outlook, according to analysts.
The extension of Malaysia’s zero-duty crude palm oil (CPO) export and higher demand from India, Pakistan and China ahead of the Ramadan fasting month in May will lend support to CPO prices to be traded between RM2,400 and RM2,600 per tonne in the short term.
Other supporting factors include concerns over the lower soybean crops this year and China’s plan to slap a 25% tarifff on the US soybean imports which would provide the potential for CPO to become a substitute for soybean imports, added the analysts.
The Malaysian Palm Oil Board reported yesterday that palm oil stocks fell 6.24% to 2.32 million tonnes in March – the lowest in five months – down from a month earlier.
This is attributed to a surge in exports by 19.2% at 1.565 million tonnes, despite a 17.2% increase in CPO production at 1.573 million tonnes in March.
According to CIMB Investment Bank (IB), the extension of the CPO duty-freeze till the end of this month is a surprise to the market and positive for CPO prices.
Last Friday, the Plantation Industries and Commodities Ministry announced that the CPO export duty exemption would be extended until end-April or when local palm oil inventories fall below 1.6 million tonnes, whichever comes first.
CIMB IB said: “This move is positive for local planters, as it will allow CPO exporters in Malaysia to save RM124 per tonne (5% (export tax) x RM2,475 per tonne (reference price for CPO).
“This will help boost CPO exports from Malaysia, as it will be more competitive against Indonesian CPO exports, which are subject to a CPO levy of US$50 per tonne.”
On the other hand, the extension of the CPO duty-free tax is negative for Malaysian refiners, as they will be less competitive against the Indonesian refiners.
“Following the suspension, the export tax differential between processed palm oil (refined products) and CPO will be zero in Malaysia compared with the US$20-US$30 per tonne for Indonesian refiners,” it added.
CIMB IB pointed out that Malaysian planters with significant upstream operations such as Genting Plantations Bhd
image: https://cdn.thestar.com.my/Themes/img/chart.png
, Hap Seng Plantations Bhd, Felda Global Ventures Holdings Bhd
image: https://cdn.thestar.com.my/Themes/img/chart.png
image: https://cdn.thestar.com.my/Themes/img/chart.png
would benefit from this measure in the near term.
While planters with integrated palm oil operations in Malaysia such as IOI Corp Bhd
image: https://cdn.thestar.com.my/Themes/img/chart.png
image: https://cdn.thestar.com.my/Themes/img/chart.png
and Wilmar International Ltd will see minimal earnings impact, it added.
CIMB IB expected the average CPO price to be at RM2,700 per tonne for 2018.
Read more at https://www.thestar.com.my/business/business-news/2018/04/11/low-stockpile-to-support-cpo-price/#27ACcS3x8lKBa0bm.99