Business Times IOI boss still bullish on CPO price

It would be good if prices trade in a stable range at between RM2,600 and RM2,800 per tonne for the rest of the year, says executive chairman Tan Sri Lee Shin Cheng

IOI Corp Bhd (1961) is optimistic of crude palm oil prices (CPO) averaging between RM2,600 and RM2,800 per tonne for the rest of the year because of robust global demand.

"Palm oil, being a very affordable vegetable oil, continues to see strong global demand. Compounded with less harvest of palm fruits, stock levels have fallen for four consecutive months," executive chairman Tan Sri Lee Shin Cheng said.

Latest government updates show that palm oil inventories have fallen from an all-time high of 2.27 million tonnes in November last year to 1.36 million tonnes as at end-March.

Last year, IOI Corp's 80 oil palm estates in Malaysia and Indonesia, on which 150,000ha are planted, produced close to four million tonnes of fresh fruit bunches. This translates into a yield of 29 tonnes per hectare per year.

With IOI Corp being one of the most efficient producers in the world, Lee's views on palm oil prices are closely followed by traders and industry analysts.

"Six months ago, I foresaw prices would likely surpass RM2,000 per tonne. Many planters had cut back on fertiliser and now you see the trees producing fewer fruits," he told Business Times in a telephone interview.

Malaysian Palm Oil Board (MPOB) data show that CPO output in the first three months of this year fell 4 per cent to 3.79 million tonnes from 3.95 million tonnes a year ago.

Last Friday, third month benchmark palm oil futures on the Bursa Malaysia Derivatives market added RM30 to close at RM2,299 per tonne.

Asked if planters like IOI Corp were comfortable with current prices, Lee replied: "I'm happy. Actually, I'm still bullish on prices, but it is not good for prices to jump too high, like last year.

"It would be good if prices trade in a stable range at between RM2,600 and RM2,800 per tonne for the rest of the year. I think this level is fair for both planters and consumers."

Last year, prices leapt to an all-time high of RM4,486 in March but plunged to a low of RM1,390 in October, resulting in an average price of RM2,773 per tonne. This translated into RM65.19 billion of exports.

When compared to the average price of RM2,517 per tonne in 2007, Malaysia earned RM45.17 billion in palm oil shipments.