Palm oil stocks expected to climb 15pct in May on increased output
KUALA LUMPUR: Palm oil inventories are expected to rise by 15 per cent month-on-month (MoM) in May to 2.15 million tonnes, driven by stronger production.
CIMB Securities anticipates crude palm oil (CPO) output to grow by four per cent MoM to 1.75 million tonnes, while palm oil exports are projected to increase by eight per cent to 1.19 million tonnes.
"However, according to Intertek, Malaysian palm oil exports fell nine per cent month-on-month to 293,911 tonnes in the first 10 days of May, reflecting a slow start to the month.
"The recent 22 per cent decline in CPO prices — to RM3,787 per tonne currently from a peak of RM4,835 per tonne on April 2 — reflects concerns over weaker crude oil prices and the 10 per cent reciprocal import tariff imposed by the US on Malaysia and Indonesia, which makes palm oil less competitive in the US market," it said in a note.
Meanwhile, the firm said that the Indonesian Ministry of Energy reported biodiesel consumption of 4.4 billion litres from Jan 1 to Apr 24, 2025, keeping it broadly on track to meet its annual target of 15.6 billion litres.
Palm kernel prices have also remained firm at RM3,421 per tonne, representing 90 per cent of CPO prices and indicating a shortage of coconut oil.
"We project CPO prices to remain in the range of RM3,700–4,000 per tonne in May, given rising supply, and maintain our view that prices in the second quarter will be lower compared with the first quarter. Our average CPO price forecast of RM4,200 per tonne for 2025 remains unchanged," it added.
Malaysian closing palm oil stocks rose 19 per cent month-on-month and seven per cent year-on-year to 1.87 million tonnes in Apr 2025, the highest level in six months, driven by higher output.
Stock levels exceeded the firm's forecast of 1.68 million tonnes and Bloomberg's estimate of 1.79 million tonnes owing to higher-than-expected production.
The firm downgraded its rating on the agriculture and forestry sector to 'Neutral' following the downgrade of SD Guthrie Bhd to 'Hold' from 'Buy' due to limited near-term catalysts. IOI Corp Bhd remained its preferred stock in the sector with a 'Buy' call.
In a separate note, Hong Leong Investment Bank (HLIB) said that the uptrend in palm oil stock levels will likely persist in the near term, driven by several factors. These include a seasonally higher cropping pattern, subdued festive-driven demand, and weak crude oil prices, which imply lower discretionary biodiesel blending activities.
"Additionally, the conflict between India and Pakistan, two of the major importers of palm oil, could dampen demand from these markets if the tension re-escalates," it added.
The firm kept its CPO price assumptions for 2025 and 2026 of RM4,000 per tonne and RM3,800 per tonne, respectively, with the view that continued output recovery (particularly from Indonesia) will continue to cap palm oil prices over the near to medium term.
It maintained a 'Neutral' call on the plantation sector due to the absence of a demand catalyst.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New Straits Times
26 minutes ago
- New Straits Times
HSBC Survey: Malaysian firms turn inward amid rising trade pressures
KUALA LUMPUR: Around 42 per cent of Malaysian businesses have shifted their focus to the domestic market, prioritising local customers and minimising exposure to global uncertainties, according to HSBC's 2025 Global Trade Pulse Survey. This strategic pivot reflects efforts by companies to mitigate the effects of tariffs and other trade-related challenges on their operations. Among the 250 Malaysian firms surveyed, more than half flagged rising costs from tariffs and trade barriers as a key concern. To address ongoing supply chain disruptions, 37 per cent have already increased inventory levels, while another 49 per cent plan to do the same, signalling a broader push towards strengthening supply chain resilience. Despite the global uncertainties, optimism about international growth remains high among Malaysian businesses but they need external strategic advice on the matter. 91 per cent of them expressed confidence in their ability to grow international trade, surpassing the global average of 89 per cent. Encouragingly, 73 per cent of respondents believe that trade uncertainty has prompted their businesses to evolve and seek new opportunities. Meanwhile, more than half are actively seeking strategic advice on international expansion, business restructuring or supply chain realignment. Considering current trade dynamics, 61 per cent of the local businesses are adapting their trade strategy to significantly increase connections with China, followed by South Asia (55 per cent) and North Asia (44 per cent). 32 per cent of them plan to trade more with Europe and the United States. HSBC Malaysia chief executive officer and head of banking Datuk Omar Siddiq said the businesses in Malaysia continue to show resilience and adaptability in navigating the challenges posed by the uncertain tariff and trade landscape. "While supply chains may be further reconfigured, there continues to be strong potential for local companies to leverage Malaysia's strong trade ties, particularly in Asia. "Having said that, it is key to note that markets like the US remain key trade destinations for Malaysia for high-value sectors such as electronics and semiconductors," he said in a statement. The survey also pointed out that while managing cost remains a top priority for Malaysian businesses amid global uncertainties, many are seizing the opportunity to innovate and adopt new technology to boost operational efficiencies. HSBC said 64 per cent of Malaysian businesses have adopted new technology or digital platforms, while 48 per cent have developed new products and services. Other growth opportunities that the businesses are considering include shifting their focus to domestic or regional growth (57 per cent) and improving their internal efficiencies or changing their cost structures (54 per cent). The survey also indicates that during the current period of trade disruption, Malaysian businesses find cash and liquidity management as the most helpful form of support in managing working capital (64 per cent), followed by improved payment terms with buyers and suppliers (56 per cent) and supply chain finance (55 per cent). "With over 70 per cent of Malaysian businesses anticipating sustained cost increases from the impact of tariffs and trade uncertainty on the cost of doing business and businesses facing an average 18 per cent drop in revenue, the imperative for strategic adaptation is clear." "Despite uncertainties, the world is also full of opportunities. Navigating this climate requires not only agility but strong partnerships to ensure sustained growth in a shifting global economy," Omar added.
New Straits Times
26 minutes ago
- New Straits Times
Bond rally slows in Malaysia amid cooling July rate cut bets
KUALA LUMPUR: Investor appetite for Malaysian bonds has cooled, with the market beginning to scale back expectations of a July interest rate cut, according to CIMB Securities. In a research note, it said the Malaysian Government Securities curve "extended its slide", with the yield on the 10-year benchmark rising 2.1 basis points to 3.55 per cent. The firm described the yield curve movement as a "bear-flattening", a pattern that typically signals reduced confidence in near-term monetary easing, as investors demand higher yields on longer-term bonds. In contrast, Indonesia's bond market continued to rally, with the 10-year government bond yield falling 2.8 basis points (bps) to 6.73 per cent, driven by "increasing expectations of back-to-back Bank Indonesia rate cuts." Although Malaysia's 10-year yield is down 26.2 basis points year-to-date, CIMB Securities said the local bond rally has been more moderate than those in Thailand and Singapore, where yields have declined by 55.5 and 54.6 bps, respectively. However, Malaysia is slightly ahead of Indonesia, whose 10-year yield is down 23.4 bps year-to-date. Lower bond yields generally indicate stronger investor demand on expectations that interest rates will fall, boosting bond prices. CIMB Securities maintained a base case that Bank Negara Malaysia will reduce its policy rate to 2.75 per cent by the third quarter, but market movements suggest investors may be growing cautious about a cut materialising in the July policy meeting. The regional bond rallies reflect broader sentiment that global central banks may soon shift toward easing. A softer-than-expected United States consumer price index for May has reinforced expectations that the US Federal Reserve will begin cutting rates this year, creating room for policy accommodation in emerging markets. Investor confidence in sovereign credit profiles also appears to be improving. Malaysia's five-year credit default swap (CDS), a measure of perceived default risk, has tightened by 12 basis points this year to 43 bps. Indonesia's CDS dropped eight bps to 73 bps, while Thailand's narrowed by two bps to match Malaysia's level.
The Star
39 minutes ago
- The Star
Asian currencies strengthen on signs of easing trade tensions
Emerging Asian currencies strengthened on Thursday as the dollar weakened following a softer U.S. inflation report, while the U.S.-China trade truce and signs that President Donald Trump may adopt a milder stance in tariff talks also supported risk sentiment. The Taiwan dollar advanced 0.8% to its highest level since early-May, and the South Korean won rose 0.9%. The Malaysian ringgit inched up 0.3%, and the Thai baht rose 0.4% to a near three-week high. Investor focus this week remained on trade talks between Washington and Beijing, which concluded with a framework deal that would lift Chinese export curbs on rare earth minerals and restore access for Chinese students to U.S. universities. "Relief from the fact that both the countries have managed to reach an agreement following their talks earlier in the week has been more or less priced in by markets, which has made the U.S. dollar continue to weaken, helping Asian currencies," said Khoon Goh, head of Asia research at ANZ. The dollar index dipped 0.2% as signs emerged that Trump may take a more conciliatory tone in tariff negotiations. Trump said he was open to extending a July 8 deadline to conclude trade talks with countries before imposing higher tariffs. He also said the U.S. would send out letters in one to two weeks outlining the terms of trade deals to dozens of other countries. Meanwhile, data also showed U.S. consumer prices rose less than expected in May, prompting traders to ramp up bets on a Federal Reserve rate cut as early as September, adding pressure on the dollar. Around the world, Iran warned if nuclear negotiations fail and conflict arises with the United States, it will strike American bases in the region. Back in Asia, stocks in South Korea were up 0.9%, while those in Singapore and Malaysia edged up 0.2% and 0.1%, respectively. However, shares in Taiwan fell 0.8%. Insurance company Fubon Financial Holding , which reported a significant loss for May, was among the top drags on the benchmark index. "There are ongoing concerns about the impact of the strong Taiwan dollar on the profitability of Taiwanese life insurance companies," Goh said. Thai stocks slipped 0.4% as political uncertainty deepened with the Supreme Court set to hear a case that could result in jail time for former Prime Minister Thaksin Shinawatra. Markets in Philippines were closed for a holiday. HIGHLIGHTS: ** Pakistan boosts defence budget by 20% but slashes overall spending in 2025-26 ** South Korea, Vietnam leaders agree to expand cooperation in areas such as nuclear power - Reuters
