‘Palm oil price downturn almost over’
DUBAI/KUALA LUMPUR: The downturn in palm oil prices is almost over, according to two much-watched experts on the commodity used to make everything from soap to diesel.
Futures in Malaysia will probably trade at RM2,400 to RM2,700 a tonne from now until September, Dorab Mistry, a director and trader at Mumbaibased Godrej International Ltd, told a conference in Dubai over the weekend.
Thomas Mielke, an analyst at Hamburg-based Oil World, forecast a RM2,300 to RM2,600 range over the next six to nine months. The benchmark traded yesterday at RM2,364.
“Demand is very good and production is not performing up to expectations,” said Mistry on Sunday. Prices are so cheap that palm oil is competitive with diesel in parts of Indonesia and China, and that will spur demand, he said. “It looks like palm oil biodiesel will work.”
Mistry, based in Singapore, oversees Godrej’s trading of about 300,000 tonnes of vegetable oils a year, with about 250,000 tonnes of palm oil. He said he’d buy palm oil before taking positions in palm oil-driven equities such as Wilmar International Ltd, but he declined to give a price. “Palm has bottomed out or is in the process of bottoming out,” he said.
Prices have lost more than five per cent this year after India, the world’s biggest buyer, increased import duties. Expectations that production will rise this year in Indonesia and Malaysia, which will account for about 84 per cent of global output this year, have also weighed on prices, according to Oil World estimates. Producers face “many challenges”, according to Mielke, including a labour shortage in Malaysia and a slowdown in the expansion of planting in Indonesia.
“For 2019, 2020 and beyond 2020, there are a lot of reasons to conclude that palm oil prices are going to appreciate and one of them is that the growth in world palm oil production is starting to slow down,” said Mielke.
“This slowdown in 2019 is going to accelerate in the following years.”