CPO Prices To Remain Elevated In 1H 2025 - Analysts

KUALA LUMPUR, Jan 13 (Bernama) -- Crude palm oil (CPO) prices are expected to remain elevated in the first half of 2025 (1H 2025), trading between RM4,400 and RM4,800 per tonne, before moderating in the second half (2H 2025) to MYR4,000-RM4,400 per tonne during the seasonal peak.

RHB Investment Bank Bhd (RHB IB) supports this expectation, citing a combination of factors: the low output and stock levels in Indonesia in 2024, the rise in biodiesel mandates in Indonesia for 2025, and tighter supplies of sunflower and rapeseed oil in 2025.

"This will lead to a more apparent deficit in global oils and fats in 2025. This will, in turn, lead to stronger prices for vegetable oil in 2025, with the stock-to-usage ratio for the 17 oils and fats falling to a 15-year low of 12.6 per cent in 2025," it said in a note today.

However, key downside risks include ongoing geopolitical tensions, significant shifts in crude oil prices, weather anomalies, worsening labour conditions in Malaysia, and potential revisions to Indonesia’s tax structure and trade policies.

RHB IB maintains an "overweight" recommendation on the plantation sector, as higher and more persistent CPO prices in 2025 are expected to lead to a sector rerating. 

Kenanga Investment Bank Bhd (Kenanga IB) and CIMB Securities Sdn Bhd also reiterated their "overweight" ratings on the sector.

Kenanga IB's recommendation is based on expectations of elevated CPO prices amid tightening supply deficits.

The bank noted that the premium of CPO prices over soybean oil has recently started to narrow.

"However, overall edible oil prices, including CPO, are likely to remain high in 2025. After hitting a 28-month high in November 2024, the Food and Agriculture Organisation's 2024 edible oil price index rose by 33 per cent year-on-year, despite a slight month-on-month (m-o-m) dip," it said.

Of the four major edible oils—palm, soybean, rapeseed, and sunflower—palm oil remains the price leader.

Meanwhile, CIMB Securities projects palm oil stocks to rise 1.0 per cent m-o-m to 1.73 million tonnes in January 2025, driven by weak exports and domestic consumption.

"CPO production is expected to decline by 8.0 per cent m-o-m to 1.37 million tonnes due to seasonal factors," it said.

"Palm oil exports are projected to fall by 16 per cent m-o-m to 1.13 million tonnes, as the large CPO price premium over soybean oil and rapeseed oil encourages consumers to switch to cheaper alternatives," it added.

Soybean oil prices may remain weak amid concerns over potential US biodiesel policy cutbacks.

However, Indonesia’s plan to adopt B40 biodiesel, likely in late 1Q 2025, is expected to boost domestic demand for palm oil.

As a result, CIMB Securities has maintained its average CPO price forecast of RM4,200 per tonne for 2025.

-- BERNAMA