Logo of Phnom Penh Post newspaper Phnom Penh Post - Malaysia crude palm oil prices to remain high near-term

Malaysia crude palm oil prices to remain high near-term

Content image - Phnom Penh Post
HLIB Research maintained its ‘overweight’ stance on the Malaysian palm oil sector, underpinned by good near term earnings prospects and commendable valuations. AFP

Malaysia crude palm oil prices to remain high near-term

Malaysia's crude palm oil (CPO) prices are expected to remain elevated in the near term, supported by the La Nina phenomenon, which will likely result in delay in soybean planting in South America and seasonally lower production cycle, according to Hong Leong Investment Bank (HLIB) Research.

The research house added that for this month, slower exports to China (as winter season typically slows palm oil demand from China) and India (on the back of high prices) will be mitigated by seasonally lower palm production cycle (exacerbated by the onset of La Nina and labour shortfall).

HLIB Research maintained its 2022 to 2023 CPO price assumptions at 3,500 to 2,900 ringgit ($837 to $693) per tonne.

The research unit noted that exports fell 3.5 per cent month-on-month to 1.41 million tonnes in December, dragged mainly by lower exports to China, India and Pakistan, but was partly mitigated by higher exports to the EU.

“While we still hold the view that CPO prices will start trending down from the second quarter of 2022 – this hinges on several uncertainties, including the entry of foreign workers into Malaysian shores, which could be delayed, as the recent Omicron variant has resulted in the government tightening the existing standard operating procedures [SOP]; and surging fertiliser prices, which may result in planters [in particular smallholders] reducing fertiliser application to oil palms, hence derailing the anticipated yield recovery,” said HLIB Research.

HLIB Research maintained its “overweight” stance on the sector, underpinned by good near-term earnings prospects (arising from high CPO prices) and commendable valuations.

Maybank Investment Bank (IB) Research also noted that CPO prices are off to a good start this year due to weather risk in this region as well as South America.

“High fertiliser prices, disrupted fertiliser supplies and labour shortage in Malaysia may possibly cause palm oil yields to again come in below expectation in 2022,” said Maybank IB Research.

The research unit also reckoned that Malaysia’s export competitiveness to India has been eroded since late last month as India cut the basic import tax on refined palm oil to 12.5 per cent from 17.5 per cent until March, and extended unrestricted import of refined palm oil until December 2022 (from last month).

“We view these recent policy changes to favour Indonesia’s refiners over Malaysian refiners,” said the research unit.

Maybank IB Research also pointed out that the weather risk in South America, especially in the southern part of Brazil (the world’s largest soybean producing country) and Argentina (third largest after the US), is slowly being reflected in industry estimates due to unfavourable weather there.

Meanwhile, Kenanga Research is expecting January 2022 production to just more or less meet exports with imports needed to meet domestic consumption.

“Some drawdown of December inventory is also anticipated hence end-January 2022 inventory is expected shrink by about nine per cent month-on-month,” said Kenanga Research, adding that a labour shortfall is to set to continue constraining the sector in the first half of this year.

The research unit said guest workers are expected to only start trickling in after the second quarter of the year.

According to Kenanga Research, palm oil fundamentals over the next month or two suggest little room for bad news, be it unexpected labour shortages, poor weather or negative news from rival oil and fat complexes.

The prevailing key factors are the speed of foreign workers intake to address the labour situation, Chinese and Indian demand, environmental, social and governance (ESG) developments, and supply-demand dynamics of other edible oils.

Kenanga Research maintained its “neutral” rating on the plantation sector as supply should progressively ease current tightness in the global oils and fats market.



  • Hong Kong firm done buying Coke Cambodia

    Swire Coca-Cola Ltd, a wholly-owned subsidiary of Hong Kong-listed Swire Pacific Ltd, on November 25 announced that it had completed the acquisition of The Coca-Cola Co’s bottling business in Cambodia, as part of its ambitions to expand into the Southeast Asian market. Swire Coca-Cola affirmed

  • Cambodia's Bokator now officially in World Heritage List

    UNESCO has officially inscribed Cambodia’s “Kun Lbokator”, commonly known as Bokator, on the World Heritage List, according to Minister of Culture and Fine Arts Phoeurng Sackona in her brief report to Prime Minister Hun Sen on the night of November 29. Her report, which was

  • NagaWorld union leader arrested at airport after Australia trip

    Chhim Sithar, head of the Labour Rights Supported Union of Khmer Employees at NagaWorld integrated casino resort, was arrested on November 26 at Phnom Penh International Airport and placed in pre-trial detention after returning from a 12-day trip to Australia. Phnom Penh Municipal Court Investigating Judge

  • Sub-Decree approves $30M for mine clearance

    The Cambodian government established the ‘Mine-Free Cambodia 2025 Foundation’, and released an initial budget of $30 million. Based on the progress of the foundation in 2023, 2024 and 2025, more funds will be added from the national budget and other sources. In a sub-decree signed by Prime Minister Hun Sen

  • Two senior GDP officials defect to CPP

    Two senior officials of the Grassroots Democratic Party (GDP) have asked to join the Cambodian People’s Party (CPP), after apparently failing to forge a political alliance in the run-up to the 2023 general election. Yang Saing Koma, chairman of the GDP board, and Lek Sothear,

  • 11th Chaktomuk Short Film Festival draws to close

    Cambodia's 11th Chaktomuk Short Film Festival wrapped up successfully on November 28 after a four-day run, with the film “Voice of the Night” awarded top prize for 2022. Sum Sithen, the organiser of the short film festival, told The Post that the number of attendees to the