CGS-CIMB: Higher demand for Malaysian palm oil expected from China, India next year

The country’s palm oil inventory was tight at 1.72 million tonnes at end-September compared with the average of 2.1 million tonnes as at end-September over the previous 10 years. — Reuters pic
The country’s palm oil inventory was tight at 1.72 million tonnes at end-September compared with the average of 2.1 million tonnes as at end-September over the previous 10 years. — Reuters pic

KUALA LUMPUR, Oct 27 — CGS-CIMB Securities Sdn Bhd expects to see a strong demand for palm oil from China and India next year when the Covid-19 pandemic is contained.

Head of Malaysia research and regional head of agribusiness, Ivy Ng, said India is going to import more palm oil from Malaysia come 2021, especially with the opening of its hotel, restaurant and cafe (HoReCa) industry, compared to the months of April and May 2020 (when the industry was temporarily shut down, disrupted by the pandemic).

The impact of the lockdown was severe in India, although it is now starting to return to normal level.

For the record, Malaysia’s palm oil exports to India for the first nine months this year declined to 1.55 million tonnes from the 3.90 million tonnes recorded for the same period in 2019.

Exports to China, on the other hand, increased to 2.09 million tonnes during Jan-Sept 2020 from 1.61 million tonnes in the corresponding period last year. Ng expects palm oil demand from China to continue to increase.

 In view of the current stock level, which is still not tracking the historical average level, she said, the imports will allow China (and India) to stock up its palm oil inventories.

The country’s palm oil inventory was tight at 1.72 million tonnes at end-September compared with the average of 2.1 million tonnes as at end-September over the previous 10 years, she said during a question-and-answer session at the virtual Palm and Lauric Oils Price Outlook Conference & Exhibition.

“We estimate Malaysian palm oil stocks will probably stay light in October. Malaysian producers were impacted by labour shortages due to a freeze in foreign worker permits and occasional Covid-19 lockdowns.

“Besides, the La Nina phenomenon could also lead to short-term disruptions in crude palm oil (CPO) supplies.

“Overall, we project the global palm oil supply to be lower by one million tonnes in 2020 before recovering by 2.7 million tonnes in 2021,” she said, adding that the CPO price is expected to stay range-bound at RM2,500 to RM3,000 per tonne in October, averaging at RM2,500 per tonne in 2020.

For 2021, CGS-CIMB expects it to be more positive for the commodity’s price in the first half versus the second half.

However, LMC International head of South-East Asia, Dr Julian McGill, expressed concern over continued demand from India next year since the CPO price is currently trading at a higher level — above RM3,000 per tonne — while India is a price-sensitive country.

“Next year is expected to be a good year for edible oils, with good soya bean oil production in India, which might slow down its import of Malaysian palm oil.

“I would be concerned that refiners and buyers may be holding off, believing it’s going to be a good crop next year. If there is a good crop, as many people seem to be saying, that could reduce the requirement in terms of palm oil,” he said.

The two-day conference, organised by Bursa Malaysia, attracted more than 2,000 industry players from over 50 countries each year.

It provides unique opportunities for participants to gain first-hand knowledge on trading and hedging strategies, as well as insights from top industry experts on supply, demand and price outlook of the palm and lauric oils market.

It is also an established platform for building business network, promoting brand awareness and exploring innovative business solutions worldwide. — Bernama

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