KUALA LUMPUR – CGS-CIMB Securities Sdn Bhd expects to see a strong demand for palm oil from China and India next year.
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 café (HoReCa) industry, compared to the months of April and May 2020 (when the industry was temporarily shut down, because of the pandemic).
The impact of the lockdown was severe in India, although it is now starting to return to normal level.
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. – Bernama, October 27, 2020
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