Monday April 23, 2007 - The Star
With the commodity seen hitting an 8½ year high level above RM2,200 per tonne, many players are gradually revising their earlier predictions that CPO will be traded in the range of RM2,400 to RM2,500 per tonne by year-end.
THE price trend of Malaysia's top commodity - crude palm oil (CPO) - is expected to continue heading north “at least” in the first half of this year.
The volatile price movements particularly over the past two months have triggered different levels of price projections among industry experts on the commodity's average price this year.
Many market observers are predicting a higher average price at RM2,100 to RM2,200 per tonne this year compared with RM1,510.50 per tonne in 2006 and RM1,394 in 2005 as reported by Malaysian Palm Oil Board (MPOB).
However, with the commodity seen hitting an 8½ year high level above RM2,200 per tonne, many players are gradually revising their earlier predictions that CPO will be traded in the range of RM2,400 to RM2,500 per tonne by year-end.
Last Friday, CPO June futures contract closed at RM2,240 per tonne, up RM21 a week earlier while July futures settled at RM2,179 per tonne.
A listed plantation player told StarBiz that CPO was one of the hottest soft commodities traded this year given its versatile usage in food and biodiesel.
He said the commodity showed no signs of losing its steam at least in the first half of this year “although there will be minor technical corrections in prices along the way.”
He said CPO was in its elements, fundamentally supported by potential global supply shortage, trans fatty acid regulations and lower soybean hectarage in the US, strong demand from India and China as well as the biodiesel boost.
India, one of the world's largest edible oil importers, had recently slashed import duties on crude and refined palm oil by 10 percentage points in a bid to stem rising inflation.
The plantation player said: “I will not be surprised if CPO hits a 10-year high of RM2,800 by year-end with encouraging news flow supporting the commodity lately.”
Given local planters' average cost of production for palm oil between RM700 and RM800 per tonne, he said plantation players were expected to reap better profit margins this year.
“Just imagine efficient players with cost of production at only RM600 per tonne, many will be laughing to the bank with the much higher CPO prices this year,” he added.
According to MPOB, Malaysia's crude palm oil production this year is expected to register a record high of 16.5 million tonnes, up 4% from 2006.
On the local front, the Government had approved 90 biodiesel licences, of which five plants are operating with a total palm oil feedstock requirement of 350,000 tonnes.
Many believed that a large part of Malaysia's biodiesel capacity would come on stream in the second half of this year with five more plants set to operate this year.
When Malaysia's entire biofuel refining capacity comes online, up to three million tonnes of CPO, or 20% of domestic production, will be taken up.
An analyst with Aseambankers said: “Our initial excitement on the re-rating of the sector in the second half of this year appears to be fast tracked by the present short term tightness in the supply of palm oil, which means present CPO price at RM2,150 per tonne may be sustainable and perhaps inch higher at the slightest positive news.”
The brokerage's neutral call on the plantation sector and CPO price assumptions of RM1,900 per tonne in 2007and RM2,000 in 2008 are presently under review for a potential upgrade.
Last month, palm oil inventory stands at a 19-month low at 1.34 million tonnes mainly due to the lower-than-expected March production at 1.08 million tonnes.
The brokerage said the short-term tightness in supply may persist this month given the good export data estimates given by cargo surveyors, Intertek Testing Services Sdn Bhd and Societe Generale de Surveillance at 666,793 tonnes and 642,492 tonnes in the first 15 days of April despite rising CPO prices.
While the tightness in supply spells good fortunes for palm oil prices, the potential risks that could upset the view include surprisingly higher CPO productions in the coming months after a seasonally low first quarter production, higher-than-expected soya bean planting this season as well as a plunge in crude oil below US$50 per barrel.
Conversely, the brokerage said higher crude oil prices could drive CPO closer to RM2,600 per tonne achieved in 1998.
1 comment:
Palm oil demand is higher and higher since few factors effect like biodiesel production, American going to plant corn instead of soya and etc. Hope that CPO price can rise up to RM2500 per tonne, then palm oil small holder only can survey. Look back this few years, goods price raise up how many percent compare with raw material (like palm oil).
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