Professional Documents
Culture Documents
11 February 2016
OVERWEIGHT
Malaysian Palm Oil Board (MPOB) has released the countrys palm oil statistics for January 2016. Palm oil
inventory in Malaysia continued to decline for the second month in the row. Stockpiles of palm oil in Malaysia shrank
by 12.4% from 2.63mil tonnes in December 2015 to 2.31mil tonnes in January 2016. This was marginally below
consensus estimate of 2.33mil tonnes.
The MoM contraction in palm oil inventory in January can be attributed to declines in production and imports. Palm
oil imports eased by 47.7% MoM and 52.0% YoY to 43,133 tonnes in January 2016.
However going forward, we believe that downstream companies in Malaysia would increase imports of CPO from
Indonesia as the Malaysian government has loosened the curbs on imports. The cheaper cost of raw materials
from Indonesia would help oleochemical companies compete better with synthetic chemicals, which are made
from crude oil derivatives.
Malaysias CPO production contracted by 19.3% MoM and 2.7% YoY to 1.13mil tonnes in January 2016. We believe
that oil palm trees in the country are suffering from the lagged impact of El Nino. CPO output in Sabah plunged by
21.8% from 432,288 tonnes in December to 338,074 tonnes in January while CPO production in Peninsular Malaysia
shrank by 17.1%. In Sarawak, CPO output declined by 20.5% to 234,074 tonnes in January 2016.
MPOB has forecast Malaysias CPO production to inch up 0.7% from 19.96mil tonnes in 2015 to 20.1mil tonnes
in 2016F. Indonesia Palm Oil Association has estimated the countrys CPO output to expand from 32.5mil tonnes
in 2015 to a range of 33mil to 35mil tonnes in 2016F.
Malaysias palm oil exports fell by 13.8% MoM but improved 7.4% YoY to 1.28mil tonnes in January 2016. The 7.4%
YoY expansion in exports in January was due to a 64.4% surge in Indias purchases. European Union (EU) also
bought 7.4% more palm oil products in January 2016 compared with January 2015. On a negative note, Chinas
imports of Malaysian palm oil plunged by 51.6% YoY to 104,585 tonnes in January 2016.
Indias demand could be tapering off in the short-term as the country has huge stockpiles of edible oil products
currently. As at 1 January 2016, Indias inventory of vegetable oils stood at 1.11mil tonnes. Of this, about 520,000
tonnes were stockpiles of crude palm oil while another 200,000 tonnes were inventory of refined palm oil.
Average CPO price was RM2,251/tonne in January 2016, 4.6% higher than the average price of RM2,150/tonne
recorded in December 2015. Comparing January 2016 against January 2015, average CPO price was 1.9% weaker.
We have assumed that plantation companies with operations in Malaysia would realise an average CPO price of
RM2,400/tonne in 2016F.
Biodiesel exports fell from 10,004 tonnes in December 2015 to 61 tonnes in January 2016. On a YoY basis, biodiesel
exports were 99.5% lower in January 2016. We think that biodiesel exports would remain weak due to competition
from fossil fuel, which is cheaper.
Published by
AmInvestment Bank Bhd (23742-V)
(A member of the AmBank Group)
The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended
in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer
to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd may from time to time have
a position in or with the securities mentioned herein. Members of the AmBank Group and their affiliates may provide services to any
company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived
from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and
opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability
can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute
our judgement as of this date and are subject to change without notice.
For AmInvestment Bank Bhd
(23742-V)
Benny Chew
Senior Vice President
Equity Research
Jan-01
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Plantation Sector
11 February 2016
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Source: MPOB
2.7
2.2
1.7
1.2
0.7
Source: MPOB
Jan-05
Apr-05
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May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
Plantation Sector
11 February 2016
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Source: MPOB
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
Source: MPOB
Jan-05
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
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Apr-13
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Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Plantation Sector
11 February 2016
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
Source: MPOB
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
Source: MPOB
Jan-02
Apr-02
Jul-02
Oct-02
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Jan-05
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Apr-07
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Apr-14
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Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Plantation Sector
1,600
1,400
11 February 2016
310,000
260,000
210,000
160,000
110,000
60,000
Source: MPOB
CHART 8 : PRICE DISCOUNT BETWEEN CPO AND SOYBEAN OIL (%) (UP TO DEC 2015)
(US$/tonne)
CPO price
1,200
Discount/premium
400
-5.0%
-10.0%
1,000
-15.0%
800
-20.0%
600
-25.0%
-30.0%
-35.0%
200
-40.0%
-45.0%
Source: MPOB
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May-14
Jul-14
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Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Plantation Sector
3,500
3,000
11 February 2016
CHART 9 : MARKET DEMOGRAPHICS OF CPO FUTURES (%) VS CPO PRICE (RM/TONNE) (UP TO DEC 2015)
50
4,000
45
40
3,500
35
30
3,000
25
2,500
20
15
2,000
10
Foreign Institutions
Domestic Retail
CPO price
0
1,500
1,000
4,000
CPO price
CPO stocks
Average inventory
500
3
2.5
2,500
2
2,000
1.5
1,500
1
1,000
0.5
Source: MPOB
20
Jan-16
Oct-15
May-15
Dec-14
Jul-14
Feb-14
Sep-13
Apr-13
Nov-12
Jun-12
140
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-12
Aug-11
Mar-11
Oct-10
May-10
Dec-09
Jul-09
Feb-09
Sep-08
Apr-08
Nov-07
Jun-07
Jan-07
Crude oil
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Jan-90
Jan-89
Jan-88
Jan-87
Plantation Sector
11 February 2016
120
3,500
100
3,000
80
60
2,500
40
CPO price
2,000
1,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
Source: MPOB