Palm oil stocks expected to climb 15pct in May on increased output
14/05/2025 (New Straits Times), Kuala Lumpur - Palm oil inventories are expected to rise by 15 per cent month-on-month (MoM) in May to 2.15 million tonnes, driven by stronger production.
CIMB Securities anticipates crude palm oil (CPO) output to grow by four per cent MoM to 1.75 million tonnes, while palm oil exports are projected to increase by eight per cent to 1.19 million tonnes.
"However, according to Intertek, Malaysian palm oil exports fell nine per cent month-on-month to 293,911 tonnes in the first 10 days of May, reflecting a slow start to the month.
"The recent 22 per cent decline in CPO prices — to RM3,787 per tonne currently from a peak of RM4,835 per tonne on April 2 — reflects concerns over weaker crude oil prices and the 10 per cent reciprocal import tariff imposed by the US on Malaysia and Indonesia, which makes palm oil less competitive in the US market," it said in a note.
Meanwhile, the firm said that the Indonesian Ministry of Energy reported biodiesel consumption of 4.4 billion litres from Jan 1 to Apr 24, 2025, keeping it broadly on track to meet its annual target of 15.6 billion litres.
Palm kernel prices have also remained firm at RM3,421 per tonne, representing 90 per cent of CPO prices and indicating a shortage of coconut oil.
"We project CPO prices to remain in the range of RM3,700–4,000 per tonne in May, given rising supply, and maintain our view that prices in the second quarter will be lower compared with the first quarter. Our average CPO price forecast of RM4,200 per tonne for 2025 remains unchanged," it added.
Malaysian closing palm oil stocks rose 19 per cent month-on-month and seven per cent year-on-year to 1.87 million tonnes in Apr 2025, the highest level in six months, driven by higher output.
Stock levels exceeded the firm's forecast of 1.68 million tonnes and Bloomberg's estimate of 1.79 million tonnes owing to higher-than-expected production.
The firm downgraded its rating on the agriculture and forestry sector to 'Neutral' following the downgrade of SD Guthrie Bhd to 'Hold' from 'Buy' due to limited near-term catalysts. IOI Corp Bhd remained its preferred stock in the sector with a 'Buy' call.
In a separate note, Hong Leong Investment Bank (HLIB) said that the uptrend in palm oil stock levels will likely persist in the near term, driven by several factors. These include a seasonally higher cropping pattern, subdued festive-driven demand, and weak crude oil prices, which imply lower discretionary biodiesel blending activities.
"Additionally, the conflict between India and Pakistan, two of the major importers of palm oil, could dampen demand from these markets if the tension re-escalates," it added.
The firm kept its CPO price assumptions for 2025 and 2026 of RM4,000 per tonne and RM3,800 per tonne, respectively, with the view that continued output recovery (particularly from Indonesia) will continue to cap palm oil prices over the near to medium term.
It maintained a 'Neutral' call on the plantation sector due to the absence of a demand catalyst.