Palm oil prices likely to average RM2,500 a tonne
KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) expects crude palm oil (CPO) prices to average RM2,500 a tonne this year.
It has maintained a “neutral” call on the plantation sector due to lack of strong demand catalysts for palm oil.
HLIB said the catalysts include weather uncertainties, which could result in supply distortion, hence boosting the prices.
“We believe the current stockpile will likely ease from this month due to a low production cycle and the government’s recent move to suspend CPO export taxes for three months.
“Hence, it will encourage exports from Malaysia to price-sensitive palm oil-consuming countries, such as China and India, which collectively accounted for 23.8 per cent of Malaysia’s CPO exports last year,” it said a research note yesterday.
CPO production rose 15 per cent to 19.9 million tonnes last year, from 17.3 million tonnes in 2016, in the absence of El Nino.
On the risks affecting prices, HLIB said higher-than-expected soyabean yield and planting would result in lower prices.
Other risks include, backtracking of biodiesel mandate in Indonesia, the imposition of a higher import duty on CPO by India and escalating production cost.
Meawnhile, Public Investment Bank (PublicInvest) said the Malaysian palm oil sector last year recorded 2.73 million tonnes of inventory, the highest level in 25 months.
The investment bank said the high inventory levels and the strengthening of the ringgit could exert more pressure on prices.
However, it said the recent CPO export tax suspension could boost exports.
PublicInvest said Malaysia’s CPO exports grew 3.2 per cent last year to 16.5 million tonnes, attributed to stronger growth led by China and Pakistan.
The biggest buyers in terms of export volume by destination were India, followed by Europe and China — at 12.2 per cent, 12 per cent and 11.9 per cent, respectively.
MIDF Research, meanwhile, has maintained its palm oil price forecast of RM2,900 a tonne this year, in view of improved demand outlook.