Palm-Oil Exports From Malaysia Seen Climbing 10% on Increased Asian Demand
Friday, 17 February 2012 | 12:58
Palm-oil exports from Malaysia, the second-largest producer, may climb as much as 10 percent this year, expanding faster than local output and helping to drive down stockpiles and support prices, an industry group forecast.
Exports may climb to a record 19.8 million metric tons from last year’s 18 million tons as demand in India and China gains, Lee Yeow Chor, chairman of the Malaysian Palm Oil Council, said in an interview. The price may advance 3.9 percent to 3,300 ringgit ($1,089) per ton in 2012, according to Lee.
Declining stockpiles in Malaysia, which have held above 2 million tons since September, may help futures extend a 15 percent rally since October, boosting profits at growers IOI Corp. (IOI) and Sime Darby Bhd. (SIME) Credit Suisse Group AG raised its forecast for 2012 prices 28 percent to 3,200 ringgit on Feb. 1, saying supplies will be capped, while demand remains strong.
“The market hasn’t completely accounted for the amount of vegetable-oil demand that’s going to be shifting to palm oil this year,” said Erin FitzPatrick, an analyst at Rabobank International in London. Prices were holding above 3,000 ringgit on prospects for lower global soybean oil and rapeseed oil output, FitzPatrick said by phone yesterday.
The April-delivery contract fell as much as 1 percent to 3,166 ringgit on the Malaysia Derivatives Exchange today before trading at 3,177 ringgit at 11:55 a.m. in Kuala Lumpur. While the price is little changed this year, it’s rallied from a 12- month low of 2,754 ringgit on Oct. 6.
Dorab Mistry, director of Godrej International Ltd., has forecast a bull market in palm oil this year as demand growth outstrips the projected increase in production. The price may reach 4,000 ringgit by June, Mistry forecast in December.
Global soybean-oil exports may decline to 8.56 million tons this year from 9.5 million in 2011, according to a forecast from the U.S. Department of Agriculture. Months of dryness caused by the La Nina weather pattern have parched crops in South America.
Palm-oil stockpiles may drop to “healthy levels” from April as shipments from Malaysia rise on growing production after the seasonally low-output months of January and February, Lee said. Global vegetable-oil demand may grow by 3 percent to 5 percent in 2012, said Lee, who’s also executive director at IOI, Malaysia’s second-largest listed producer.
‘Reduce the Stocks’
“If we can reduce the stocks to around 1.7 million tons, it will be a very positive development,” said Lee, 46, who forecast an increase in shipments of 5 percent to 10 percent. Growing demand from China, India and African countries will offset slowing imports in European countries caused by a reduction in biofuel usage and sustainability issues, he said.
Malaysian output will show “moderate” growth of less than 5 percent in 2012 after a “significant” increase last year, Lee said. Output climbed 11 percent to 18.9 million tons in 2011 from 16.99 million tons a year earlier, according to data from the Malaysian Palm Oil Board. Production may be 19 million tons this year as more plantations mature, Plantation Industries and Commodities Minister Bernard Dompok said on Jan. 19.
Malaysia is promoting new uses for the tropical oil, which include anti-oxidants such as tocotrienols and phenolics, as well as furniture made from the wood from the oil palm’s trunk, said Lee. The council promotes market expansion for the edible oil and its products, according to its website.
Indonesia, the biggest producer, cut the maximum tax rate on crude palm-oil exports last October and imposed lower duties on processed products to help the local refining industry.
If the export duty in Indonesia is helping its mid-tier refineries, one strategy for Malaysia is to go further up the so-called value chain, said Lee. “Those are very competitive” products, he said, referring to output such as oleochemicals, food esters and specialty chemicals and fats.