Indonesia’s palm oil move will hit new players

PETALING JAYA: Plantation players who are relatively new in the Indonesian market or those with significant plantable landbank in the country are likely to be impacted negatively by the moratorium on new palm oil development, according to PublicInvest Research.

Indonesia, the world’s largest palm oil producer announced on Friday that it has signed a three-year moratorium on new palm oil plantation development and will review existing plantation permits. The order is aimed at improving the sustainability of palm oil plantations.

The temporary ban is likely to improve productivity of small owners and also help clarify land ownership.

The research house is of the view that given Indonesia’s self-commitment towards the policy, there could be tighter implementation in terms of reviews of plantation permits such as Izin Lokasi (Location Permit), Izin Usaha Perkebunan (Plantation Permit), Hak Guna Usaha (Development rights) across all provinces.



To recap, Indonesia and Norway had inked an US$1billion (RM4.13 billion) agreement for a moratorium on new permits to clear primary forest in a bid to reduce greenhouse gas emissions from deforestation, forest degradation and the destruction of peat – in 2010.

However, studies show that Indonesia failed to reduce its emission from deforestation and forest degradation while more than 9.9 million ha was converted into plantation area overs 2010-2015.

Going forward, moratorium is expected to slow down the production growth of fresh fruit bunch, which in turn will support palm oil prices and ease concerns on oversupply.

The move is also expected bring down the growth of average crude palm oil from 2020 onwards, which was initially projected to grow at 3%.

Indonesia, which accounts for 51.7% of global palm , is expected to see a year-on-year increase of 5.5% to 38.5 million tonnes this year.

Bhd is the only Malaysian company unlikely to be affected by the policy as it has no exposure in Indonesia.

TSH Resources Bhd, which has close to 90% of its plantation landbank in Indonesia, has already slowed down new plantings (less than 500ha per acre) a few years ago.

Public Invest said yesterday that stocks under its coverage will not be significantly impacted as majority of them have almost fully planted their landbank in Indonesia.



Among the stocks covered by PublicInvest – Corp, , Sime Darby Plantations were rated as “neutral” while Genting Plantations and received “overweight” ratings.

The Plantation Index of Bursa was down 26.77 points or 0.35% to 7,525.42 points.

Pinehill Bhd, which said it was selling its palm oil estate in Perak for RM413.75 million last week, jumped 22.7% yesterday closing at 54 sen. United Plantation Bhd was the second biggest loser for the day losing 30 sen of its to close at RM26.82 a piece.

KLK’s share price shed 0.1% to RM25, with 137,500 shares traded. Ta Ann lost one sen to RM2.73 with 2,600 shares traded.

Source: The Sun Daily





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