Palm Oil Stockpile Expected To Rebound, Analysts Maintain 'Neutral' Stance

KUALA LUMPUR, Aug 13 (Bernama) -- Research houses anticipate an increase in palm oil stockpiles in the coming months, potentially reaching the two million-tonne mark, following a recent decline.

In July 2024, palm oil stockpiles fell for the first time since March, dropping by 5.4 per cent month-on-month (m-o-m) to 1.73 million tonnes.

In research notes today, analysts from Hong Leong Investment Bank Bhd (HLIB), RHB Investment Bank Bhd (RHB IB) and Maybank Investment Bank Bhd (Maybank IB) forecast a further rise in palm oil stockpiles, maintaining their ‘neutral’ outlook on the plantation sector.

HLIB expects the stockpile to resume its upward trend in August 2024, driven by a seasonal increase in the cropping pattern. However, exports are likely to weaken due to a narrowing price discount of palm oil against soybean oil.

The investment bank noted that palm oil exports surged by 39.9 per cent in July to 1.69 million tonnes, as palm oil’s price competitiveness improved amid low vegetable oil inventories in major importing countries.

“According to cargo surveyor Intertek Services, higher palm oil exports in July 2024 were mainly driven by increased shipments to Africa, China, the European Union, India and the Middle East.

“Exports also fell by 12.2 per cent m-o-m to 470,700 tonnes during the first 10 days of August 2024, mainly dragged down by lower shipments to India and the Middle East,” it said.

RHB IB also expects stock levels to gradually improve, potentially crossing the two million-tonne mark between November and December 2024, barring any unforeseen weather events like La Nina.

“We are maintaining our crude palm oil (CPO) price assumption at RM3,900 per tonne for 2024 and RM3,800 per tonne for 2025,” it said.

Maybank IB anticipates stockpiles to rise further by the end of the month, reaching 1.90 million tonnes, assuming the export trend remains weak throughout August.

“We continue to anticipate a meaningful build-up in stockpile during the peak production months of August to October.

"While we anticipate CPO prices to be under seasonal pressure over the next two months, we are raising our 2024 and 2025 estimated average selling prices (ASP) for CPO to RM3,850 per tonne (up by 4.1 per cent) and RM3,700 per tonne (up by 2.8 per cent) due to higher prices in the first half of 2024,” said Maybank IB.

Meanwhile, Public Investment Bank Bhd expects palm oil production in the second half of 2024 to account for at least 55 per cent of its full-year production estimate of 19.5 million tonnes.

It added that production for the first seven months rose by 10.6 per cent year-on-year to 10.7 million tonnes, with a m-o-m increase of 14 per cent to 1.84 million tonnes, driven by stronger production from Peninsular Malaysia, up by 13.9 per cent, and East Malaysia, grew by 15.3 per cent.

“We will review earnings forecasts for stocks under our coverage during this upcoming reporting season, considering revisions to ASPs, unit costs, and output,” it added.

-- BERNAMA