EXPERTS SEE HIGHER CPO PRICES NEXT YEAR
Expected fall in inventories, decline in output and biodiesel use are likely catalysts
SOME factors are fuelling optimism on the plantation sector, with experts forecasting higher crude palm oil (CPO) prices in the first half of next year.
Public Investment Bank Bhd (PublicInvest) said majority of the industry experts at the recently-concluded 15th Indonesian Palm Oil Conference and 2020 Price Outlook were turning positive about the commodity trading at between RM2,600 and RM3,000 a tonne for the January-June period.
It said this was mainly underpinned by an expected fall in global palm oil inventories as the investment bank saw a few key catalysts from the supply and demand factors that could contribute to a lower stock level in Malaysia and Indonesia.
Based on PublicInvest’s latest report on the sector, prominent speaker Oil World executive director Thomas Mielke expected palm oil prices to reach RM2,600 a tonne in the first half of next year.
Mielke predicted a decline in Malaysian production next year and Indonesian production rising to 45.4 million tonnes, the weakest growth in a decade.
He also expected global palm oil stocks to fall by between two and three million tonnes in the next one year.
“We also share the similar views as the industry experts as we generally see tightening palm oil inventories in the coming months. Hence, we had upgraded our sector outlook to ‘overweight’ early last month,” said PublicInvest.
In the near term, the investment bank expects CPO prices to see some profittaking before testing higher levels.
PublicInvest also said biodiesel may become the key growth driver for palm oil demand.
Indonesia’s move to increase mandatory bio-content use in biofuels to 30 per cent next year from 20 per cent will likely boost palm oil use in biodiesel from an estimated 5.7 million tonnes this year to about 8.1 million tonnes, making up 19 per cent of 2020 production.
Malaysia also aims to boost local consumption of palm-biofuel from 700,000 to 800,000 tonnes to 1.3 million tonnes a year as the country targets to shift from B10 to B20 fuel next year, it added.