‘Global supply to remain tight in near term’
KUALA LUMPUR: Firmer global demand for palm oil will cause further supply shortage despite higher production outlook among major exporters, including Malaysia and Indonesia, said industry experts.
Experts at the Palm and Lauric Oils Conference and Exhibition 2017 also expect global palm oil output to increase by six million tonnes and yield to recover this year.
Oil World executive director Thomas Mielke said yesterday the global supply of oils and fats would remain tight this month and June despite an expected recovery of palm oil production growth this year.
He said lower palm oil stocks would result in further decline of world supplies by 2.2 million to 2.3 million tonnes from January to this month.
“This is despite that production growth is recovering. We will see a very big increase in world production of vegetable oils by 10 million to 11 million tonnes this year, of which palm oil is likely to increase by 5.9 million tonnes.”
He said with the setback in world production, palm oil is losing market share and declining in exports due to fierce competition from soyabean and other vegetable oils.
“Palm oil has become by far the most important vegetable oil for consumers in many countries, primarily in Asia, Africa and South America, but the supply shortage made it necessary to ration demand. Demand is expected to peak ahead of 2019 and 2020.
“Soyabean oil production has been substantially increasing in the United States and South America. The same goes for rapeseed and sunflower seed oils. Due to supply shortage, palm oil is lagging behind.”
LMC International Ltd chairman James Fry said global palm oil production this year would grow by more than six million tonnes but lower than levels seen in 2015.
“As output gains pace, Malaysian Palm Oil Board (MPOB) stocks will move above two million tonnes by July and above 2.5 million tonnes from October to December.
“Looking ahead, the strong increase that will occur in MPOB stocks later this year will drag the European Union crude palm oil premium over Brent prices back to mid-2015 levels.”
MIDF Research plantation analyst Alan Lim expects Genting Plantation Bhd, IJM Plantation Bhd and TSH Resources Bhd to benefit during the yield recovery period this year due to the young age profile of their oil palms.
“Planters with young age profile will register better fresh fruit bunches growth this year,” he said.
Oil World executive director Thomas Mielke says there will be a big increase in world production of vegetable oils by 10 million to 11 million tonnes this year.