Malaysian palm oil loses price competitiveness – Maybank Kim Eng
KUALA LUMPUR (May 17): Malaysian palm oil is losing price competitiveness, Maybank Kim Eng Research said, citing creeping imports and falling exports.
Noting that Malaysia’s stock – as reported by the Malaysian Palm Oil Council (MPOB) – is often seen as an indicator of the region’s stock, the research house said the oil sector Palm runs the risk of ending the rise in prices prematurely if the rise in stocks is left unchecked.
To avoid a repeat of the 2012 price drop, Maybank Kim Eng said an immediate interim measure would be to exempt the duties on Malaysian crude palm oil (CPO) exports.
“Nonetheless, as the CPO price has averaged RM 4,061 per tonne to date, we are now revising our 2021 average CPO selling price forecast to RM 3,100 (+ 15%) while maintaining our forecast for 2022 at 2600 RM.
“We will reflect these changes in our EPS (earnings per share) forecast throughout the next earnings release,” he noted.
Maybank Kim Eng said MPOB statistics for January-April provided a glimpse of a structural problem facing the industry, although largely ignored due to high palm oil prices.
“We observed a similar trend in 2011-2012 and it is likely [to] repeat in 2021 if that [is] not addressed, ”he added.
The research house noted that in October 2011, Indonesia had changed its export tax structures aimed at attracting investment in downstream facilities through differential taxes favoring downstream products (reduction of taxes on exports). export of processed palm oil (PPO) compared to HPP).
“At the time, Malaysia had punitive export taxes on CPOs (up to 30%), which meant that exporting CPOs was not a feasible option unless the government granted them. CPO export quotas.
“Fourteen months later, Malaysia finally reorganized its tax structure in December 2012 to largely match the Indonesian tax gaps,” said Maybank Kim Eng.
Citing data from the MPOB, the research house said Malaysia was facing rampant imports (up 74% year-on-year) and declining exports (down 7%) in January-April 2021, not thanks to the progressive tax rates reorganized in Indonesia.
He added that these tax rates give Indonesian refiners an advantage over the cost of raw materials and that the widening of the tax gap has further increased Jakarta’s theoretical refining margins.
Maybank Kim Eng said the Malaysian government and industry should act quickly to avoid a repeat of 2012.
“After all, refiners are an integral part of the ecosystem as 77% of all Malaysian exports between 2011 and 2020 are in the form of PPOs. In 2012, the inability of refiners to operate profitably resulted in low utilization rates and CPO inventories increased rapidly in 2H12 during peak seasonal production months. Eventually, this sent the wrong signals to the market which led to the price of the CPO falling. That year, the CPO spot price was down 29% year-over-year at the end of 2012 to stand at RM 2,231 per tonne, ”he said.