MARKET DEVELOPMENT
Fepo completes its first physical CPO delivery in Sabah
Fepo completes its first physical CPO delivery in Sabah
23.02.2022 (www.thesundaily.my) - PETALING JAYA: Bursa Malaysia Derivatives Bhd has completed the first physical delivery of its East Malaysia Crude Palm Oil Futures Contract (Fepo) in Sabah, on Feb 17.
The delivery saw a total of eight contracts representing 200 metrics tonnes of crude palm oil (CPO) between the seller Green Edible Oil Sdn Bhd and the buyer Kunak Refinery Sdn Bhd at one of the approved Port Tank Installations in Sandakan operated by Sabah state government-owned Sawit Kinabalu Group wholly-owned subsidiary Sawit Bulkers Sdn Bhd.
Bursa Derivatives CEO Samuel Ho Hock Guan remarked that the first physical delivery for Fepo contracts demonstrates the demand from Sabah producers to sell their CPO through an alternative platform with greater price transparency.
“Our Fepo contract benefits Sabah refiners and buyers by allowing them to source CPO at competitive pricing. It also enables them to manage price risk and hedge against unfavourable price movement in the physical market, especially during the low-supply season,” he said in a statement yesterday.
Sawit Kinabalu group managing director Datuk Bacho Jansie stated that the availability of Bursa Derivatives’ Fepo contract provides East Malaysia market participants with an additional trading opportunity, improved price discovery mechanism and more physical delivery options in Sabah and Sarawak.
“As one of the designated delivery ports in Sabah, we hope to attract more market participants to lease out our available tanks, and further increase the visibility of the East Malaysia palm oil market,” he said.
The Fepo contract went live on Oct 4, 2021 providing a new avenue for physical deliveries and to hedge their positions in the physical CPO market for East Malaysia’s market participants.
Simultaneously, the contract also strengthens Bursa Malaysia Derivatives’ Palm Complex offerings and provides price transparency in the East Malaysia CPO market, further cementing Malaysia’s position as the global centre for palm oil price discovery.
One of Fepo’s key value propositions is “Sell & Deliver” feature, which enables sellers to discover alternate selling prices via the exchange, in addition to the industry’s conventional average price. Sellers can then choose to offload their CPO at one of the approved Port Tank Installations in Sandakan, Lahad Datu, or Bintulu.
Furthermore, all physical CPO deliveries made under the Fepo contract must be sourced from mills that meet the Oil Palm Management Certification under the Malaysian Sustainable Palm Oil Certification Scheme’s requirements.
Since the launch on Feb 8, Bursa Derivatives recorded a total trading volume of 3,250 contracts equivalent to 81,250 metric tonnes of CPO. Its highest daily trading volume was recorded on Jan 5 at 122 contracts representing 3,050 metric tonnes of CPO.