The Star CPO, tin and rubber may rebound in Q2

CPO, tin and rubber may rebound in Q2 by Hanim Adnan Petaling Jaya

Crude palm oil (CPO), tin and rubber prices may experience minor rebounds in the second quarter this year but could find it difficult to secure a stronger footing on shrinking demand, given the global economic crisis.

Analysts are projecting CPO prices in this quarter to range from RM1,500 to RM2,100 per tonne, easily over 50% lower from RM3,400 to RM3,600 a year ago.

Tin, which has fallen 56% to US$10,527 per tonne on the KL Tin Market (KLTM) on March 31 from its record at US$24,040, is expected to trade above US$11,000 this quarter on tight supply and declining stocks in London Metal Exchange (LME) warehouses.

Malaysia’s SMR 20 and latex-in-bulk prices are expected to stabilise above RM5 and RM3 per kg following the move by world rubber producers – Indonesia, Thailand and Malaysia – to cut exports by up to 20% this year to support the commodity’s price.

Macquarie, in its Asean plantation report, said the next price direction of edible oils, including CPO, would depend on the extent of demand recovery as well as weather conditions during the planting season for its competitor, soybean, in the United States.

The latest positive news is that the US Department of Agriculture (USDA) indicated that the 2009 planting prospects are at 76 million acres, lower than street estimates of 79.2 million acres.

USDA also reported lower soybean stocks of 1.3 billion bushels as at March 1, slightly lower than street expectations of 1.32 billion bushels.

HwangDBS Vickers Research expects CPO to average RM1,900 per tonne in 2009, supported by slower soybean output supply growth, while the La Nina’s effects in South America could offset the anticipated jump in soybean output in the US.

During the first quarter, CPO managed to hold its fort well, especially in March, with prices trading at RM1,900 to RM2,000 per tonne from RM1,700 to RM1,850 in January.

This is attributed to the declining Malaysian Palm Oil Board palm oil stocks at 1.56 million tonnes as at end-February, better exports and active replanting activities.

As for rubber, its first-quarter prices were mainly supported by the prospects that the three major rubber-producing nations, which account for 70% of world output, would possibly remove 1.35 million tonnes from the world market this year.

There are also plans to set a fixed floor price of US$1.35 per kg for rubber soon to help shore up prices affected by the ailing global motor vehicle sector and weak crude oil prices.

Another major development is China’s move to stockpile natural rubber (NR) and the possibility of the Chinese government lowering import tariffs on NR.

Meanwhile, the weak tin price on KLTM in the first quarter was within market expectations, averaging at US$10,931 per tonne.

However, analysts expect tin fundamentals to remain strong on tight supply and a possible deficit this year.

Demand may be slowing in the US but many opine the low tin prices on LME will rebound before year-end.

LME warehouse inventories for tin have fallen to the lowest level since July 2005 by 500 tonnes to 4,080 tonnes.

Output from Indonesia, the world’s leading tin producer, is falling drastically due to the clamping down on illegal miners while the world’s second-largest tin producer, China, is tightening its exports.