[Analytics] Palm oil firms seeing solid export trend

Regional palm oil plantation companies are seeing a solid export trend, with upbeat export performance in January offsetting a firm output performance, said DBS Group Research analysts in a Feb 11 note. ASEANbusiness staff specially for The Business Times.

Malaysia saw its crude palm oil (CPO) stockpile retreating from December’s all-time high, down 6.7 per cent month-on-month to 3 million metric tons (MT) in January — though this was still up 17.8 per cent year-on-year. The DBS analysts expect the normalising inventory trend to persist in February.

Led by exports to China and India, January’s CPO exports reached 1.68 million MT, up 14 per cent year-on-year and 21 per cent month-on-month. Exports to China were spurred by an early restocking in January ahead of the Chinese New Year holidays, up 102 per cent year-on-year and 18 per cent month-on-month at 317,000 MT. India’s CPO imports were boosted by a lower CPO import tax, up 58 per cent year-on-year and 12 per cent month-on-month to 318,000 MT.

The DBS analysts expect exports to ease in February on the back of Chinese New Year holidays in China, before rebounding in March, adding: “The current CPO price is attractive enough to spur demand, in our view.”

This stronger-than-expected export showing managed to offset January’s strong output performance. Though down 3.9 per cent month-on-month due to seasonally low output in the first quarter of the year, January output at 1.73 million MT was still up 9.5 per cent year-on-year and on track for DBS’s 2019 forecast.

“January output was still relatively strong as some harvests in late December may be carried forward to the next month,” noted the analysts. They see February output possibly easing month-on-month to 1.5 million to 1.6 million MT.

The current soybean oil and CPO spread of US$140 per MT can provide a short-term price catalyst for CPO prices to move higher, said the analysts. They also noted that soybean oil prices are expected to improve in anticipation of less favourable weather for soybean crops in South America. DBS is keeping its 2019 CPO price forecasts as well as top BUY calls for Indonesia’s Astra Agro (AALI) and London Sumatra (LSIP); Singapore’s First Resources (FR), Bumitama (BAL) and Wilmar (WIL); and Malaysia’s TSH Resources (TSH).