CPO prices to hover between RM3,500 and RM4,000: Kenanga Research
13 Feb 2023 (www.nst.com.my) KUALA LUMPUR: Crude palm oil (CPO) prices are expected to hover between RM3,500 and RM4,000 per tonne, said Kenanga Research.
The firm said overall edible oil supply seemed to improve this year but demand was likely to recover by three to five per cent year-on-year (YoY).
"This would be due to broadbase consumption recovery post-Covid-19 after stagnating since 2020, China - the world largest edible oil market - recently relaxing its zero Covid-19 stance and robust demand for biodiesel as nations such as Indonesia (third largest biodiesel user) has just raised its B30 blend to B35 on Feb 1, 2023.
"As such, we expect CPO prices to hover between RM3,500 and RM4,000 per tonne. Rising production cost is a concern though as despite average fertiliser price has eased by about 20 per cent since a peak in May 2022, it is still 70 per cent higher YoY," it said.
CPO price had weakened by 27 per cent YoY but by only one per cent month-on-month to RM3,922 per tonne for January 2023, Kenanga Research noted.
The firm another pressure-point on unit cost was fresh fruit bunch production which was being weighed down by ageing palm trees and replanting.
Altogether, upside potential for margin was expected to stay limited, it added.
Kenanga Research said Malaysia's production of 1.38 million tonnes of palm oil for January came in below five per cent of its expectation but just short by one per cent of consensus 1.39 million tonnes.
"However, export were 15 per cent weaker than our 1.322 million tonnes estimate though one per cent above consensus. Closing inventory thus swelled by four per cent to 2.268 million tonnes, above our expectation of 2.178 million tonnes and consensus' 2.180 million tonnes.
"Compared to historical average and pattern, though production came in line, export was slower, possibly due to disruptions from the early Chinese New Year in January this year versus February as was the norm; hence, the higher-than-average end-inventory level for this January," said the firm, which maintained its "Neutral" call on the plantation sector.