KUALA LUMPUR: Palm oil industry players seem sceptical over this year’s outlook, as crude palm oil (CPO) prices are projected to decline by 12%, on the back of mounting inventory for the commodity.
Plantation consultant and Gan Ling Sdn Bhd director Ling Ah Hong said CPO prices are expected to be on a downtrend, unless there is a disruption in oilseed production, which could reverse the trend.
“The rising CPO inventory in Malaysia and Indonesia is indicative of supply outweighing demand. Therefore, boosting biodiesel usage, especially in Indonesia, would be a good thing for the industry,” he said during the Global Palm Market Outlook 2018 session today.
The session was part of the Reach and Remind Friends of the Industry Seminar 2018 and Dialogue organised by the Malaysian Palm Oil Council.
The absence of weather extremity has also contributed to the higher palm oil inventory this year, as weak La Nina may potentially support the robust palm oil supply growth, thus pressuring the CPO price, particularly in the second half of this year.
He noted that in 2015, strong El-Nino in 2015, which brought more rain and storms to the region, led to a strong price rally in 2016 and saw the CPO price soared 66%.
“According to the Ganling weather-based CPO forecast for 2018, Malaysia would see an additional 6.6% growth of its inventory and hit 21 million tonnes of plam oil, whereas, Indonesia’s inventory would increase 7.5% to 37.2 million tonnes.
“Both countries account for 85% of the global supply and if we combine both producing countries’ inventories, the growth would be 7.2% or four million tonnes,” he said.
Meanwhile, Singapore-based Palm Oil Analytics owner and co-founder Dr Sathia Varga said the website projected that Malaysia’s supply would be at 20.52 million tonnes, whereas Indonesia’s would stood at 39 million tonnes.
“Among the challenges that lie ahead for the industry are the debate on the European Union proposed ban on palm oil, the US and the EU anti-dumping duties on Indonesia’s biodiesel, India’s import tariff on the palm oil, and labour market reform,” he said.
However, he stressed that Malaysia’s move in removing export tax for the period of three months is expected to assist in reducing the inventory and a positive element for CPO price in the first half of this year.
“This makes Malaysia’s CPO more attractive,” he added. – Bernama
Source: The Sun Daily