Palm oil in­dus­try in the dol­drums

The Borneo Post (Sabah) - - HOME -

KUCHING: Malaysia’s palm oil fu­tures hit a fresh three­year low on Fri­day over wor­ries that a hike in pro­duc­tion would add on to in­ven­to­ries as global coun­tries slow down on buy­ing crude palm oil (CPO).

The bench­mark palm oil con­tract for Novem­ber 2018 de­liv­ery on Bursa Malaysia’s De­riv­a­tives Ex­change (MDEX) was down to RM1,880 per tonne at Fri­day’s close.

Palm oil has de­clined ev­ery day this week in what traders say could be “the big­gest weekly de­cline since the week ended July 2013.”

Ac­cord­ing to Bursa, CPO de­liv­ery prices traded be­tween RM1,885 and RM1,930 per tonne on Fri­day.

Philip Fu­tures Sdn Bhd de­riv­a­tives prod­uct spe­cial­ist David Ng said that CPO prices con­tinue to see pres­sure amidst per­sis­tent signs of weaker ex­ports and higher pro­duc­tion.

“Traders will be look­ing ahead to the Malaysian Palm Oil Board re­port due on Mon­day on ex­port fig­ures for the first ten days of this month for mar­ket di­rec­tion,” he added.

Closer to home, an­other trader based in Sin­ga­pore said there was a de­bate as to whether (CPO) spot prices in Sarawak can break RM1,800 by month end.

The sit­u­a­tion for the state is made worse when com­pared against In­done­sia whose CPO price which is cur­rently lower than US$450 per tonne.

“At an ex­change rate of RM4.17 per US dol­lar, RM1,900 trans­lates to about US$455,” the trader es­ti­mated. “Given the cheaper freight costs from In­done­sia Straits ports to In­dia -- be­ing cheaper than Bin­tulu to In­dia by US$3 to US$4 per met­ric tonne -- In­done­sian prices are ef­fec­tively US$7 to US$10 cheaper than Sarawak.

“The most dis­cour­ag­ing part is that there is no light of the end of the tun­nel,” the trader said.

This does not in­clude ad­di­tional costs faced by East Malaysian palm oil play­ers such as im­posed cess, and high labour re­cruit­ment fees on the in­dus­try, he said, “mak­ing life very dif­fi­cult es­pe­cially for Sarawak.”

The trader also com­mented that China is likely to be done buy­ing for their De­cem­ber ship­ment re­quire­ment, while Malaysia’s pro­duc­tion is still go­ing strong.

This comes as the Malaysian Palm Oil As­so­ci­a­tion on Thurs­day re­ported that Malaysia pro­duc­tion is es­ti­ated to be eight per cent higher month-to-month, at two mil­lion met­ric tonnes.

“With de­mand still weak and pro­duc­tion still strong, Malaysia would be reg­is­ter­ing record stock of 3.2 to 3.3 mil­lion met­ric tonnes in CPO stock by the end of De­cem­ber,” the Sin­ga­pore-based trader said.

“A lower price is needed to buy de­mand. Given this sce­nario, RM1,800 for East Malaysia is fast be­com­ing a re­al­ity.”

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