PETALING JAYA: Malaysian plantation companies, especially pure upstream players, are set to be the net gainers from the latest decision by the Indonesian government to expand its export ban on palm oil.
Listed plantation companies on Bursa Malaysia rallied yesterday, with stocks such as Batu Kawan Bhd rising 48 sen to RM29, Kuala Lumpur Kepong Bhd (KLK) firmed 48 sen to RM29.28, IOI Corp Bhd up nine sen to RM4.68 and Sime Darby Plantation Bhd advanced three sen to RM5.23.
The Indonesian government did a U-turn from its earlier policy stance to only ban refined, bleached and deodorised palm olein to now also include a ban on exports of all types of palm oil effective yesterday.
This move by the Indonesian government will include crude palm oil (CPO) and refined palm oil, which will also cover red palm oil, palm oil mill effluent and used cooking oil.
The objective of the ban is to further improve the cooking oil supply situation in Indonesia and it will be lifted once domestic demand is fulfilled.
chief executive director Datuk Carl Bek-Nielsen said the latest move by the Indonesian government will have “severe repercussions” on the global oils and fats market." src="https://apicms.thestar.com.my/uploads/images/2022/04/29/1568652.jpg" onerror="this.src='https://cdn.thestar.com.my/Themes/img/tsol-default-image2017.png'" style="width: 620px; height: 413px;">United Plantations Bhd chief executive director Datuk Carl Bek-Nielsen said the latest move by the Indonesian government will have “severe repercussions” on the global oils and fats market.
Rakuten Trade head of equity sales Vincent Lau said this is good news for Malaysian plantation companies and will sustain the elevated CPO price at around RM6,000-RM7,000 per tonne levels.
“I think even without this ban, the plantation companies will still report a solid set of results in the near term.
“The CPO prices will likely stay at these elevated levels but may not rise much further.
“I also don’t think it will rise to RM9,000 per tonne as it would be unsustainable. If the ban is reversed, then we may see some easing up on CPO prices,” Lau told StarBiz.
Meanwhile, United Plantations Bhd chief executive director Datuk Carl Bek-Nielsen said the latest move by the Indonesian government will have “severe repercussions” on the global oils and fats market.
“This will literally cut off the largest vegetable oil exporter from supplying palm oil. This, to me, will impact markets in the short term and very likely with a high degree of volatility by pushing up prices,” Bek-Nielsen told StarBiz.
“However, I do not see this as a sustainable decision as Indonesia will soon run out of storage space and this will be accelerated in tune with the palm (trees) entering their peak cropping months.
“When this happens, things will normalise and the supplies to the world market will resume,” Bek-Nielsen added.
He said Malaysian exporters will stand to benefit in the short term and this also reinforces Malaysia’s position as a reliable exporter of high quality oils and fats.
PublicInvest Research noted that the move will cause jitters to the global vegetable oil supplies again.
This is because India, which is the biggest consumer of Indonesian palm oil, imports up to 13.5 million tonnes of edible oils, of which around eight to 8.5 million tonnes or 63% of its edible oils are palm oil.
“This will result in heightening tensions to the already tightening global vegetable oil markets.
“Almost 45% of India’s palm oil comes from Indonesia and the remainder from Malaysia.
“Following the complete palm oil export ban, the market is anticipating monthly supplies of around 300,000 to 325,000 tonnes of palm oil to be taken off from the supply of global markets,” PublicInvest Research added.
It also said Indonesian plantation players are the losers while Malaysian pure upstream players will be the winners from such a move by the government.
“Malaysian plantation players such as Genting Plantation, KLK, Sime Darby Plantation Bhd and TSH Resources Bhd that have strong exposure to Indonesian market would not be able to fully capture the current strong CPO price performance,” said the research house, while retaining its “overweight” call on the sector.
This is due to the hefty export duties and zero-export policy in place following the export ban.
“This ban on palm oil exports is likely to have massive repercussions on the global edible oil market in the short term,” CGS-CIMB Research said.
Indonesia is currently the largest edible oil producer and exporter in the world and accounted for 56% of exports of palm oil and 34% of exports of edible oils globally.