The Star Palm oil stocks may stay flat

Petaling Jaya

Lower inventory in Indonesia and Malaysia could trigger rise in exports

Malaysia’s palm oil stocks are expected to remain flat or fall slightly to about 1.25 million tonnes in end-May buoyed by good exports, say analysts.

Based on preliminary estimates by independent surveyor Intertek, palm oil exports in May rose 1.7% to 1.21 million tonnes compared with the previous month.

Malaysia, the world’s second largest palm oil producer, exported 1.19 million tonnes of palm oil in April, said the surveyor.

Independent cargo surveyor Societe Generale de Surveillance also estimated palm oil exports rose 5.1% last month. It tracked a total of 1.23 million tonnes of palm oil in May.

An analyst at a local brokerage said there was also risk that some Indonesian palm oil producers might have shifted their output to Malaysian ports prior to Indonesia’s imposition of 3% crude palm oil export duty on June 1 that could distort the actual local palm oil stocks.

“Palm oil inventory can still fall slightly but the quantum will be determined by the volume of imports from Indonesia,” he added.

The lower inventory in Indonesia and Malaysia, which collectively command 85% of the world’s palm oil production, could be one of the reasons that could trigger an increase in local palm oil exports.

Local palm oil stocks fell to their lowest in almost two years in April at 1.29 million tonnes, down 27.8% from a year earlier and 5.4% month-on-month.

Analysts said the market was generally expecting higher exports in May, driven primarily by India and China.

On the other hand, a re-imposition of import duty on edible oils in India, which has yet to materialise, could also lead to lower palm oil exports from Malaysia.

Palm oil exports to China, one of Malaysia’s biggest buyers of the commodity, fell 13% to 14.39 million tonnes in the first five months this year, compared with the same period last year, according to Societe Generale.

“Even if inventory slides a bit more, I don’t think the market will react much since production is recovering both in Malaysia and Indonesia,” an analyst said.

“Besides, there is also higher than usual stockpile in India, which could slow purchases in the coming months,” he said.

Although it is hard to predict whether stocks would decline in May, inventory in the second half of the year is generally higher as palm trees enter a seasonal high production period.

According to market talk, the current month-on-month growth estimate for Malaysia’s palm oil production ranges from 5% to 10%.

Analysts said palm oil production should continue to recover and May’s production should fare better than the past few months.

The Malaysian Palm Oil Board is expected to release the palm oil inventory, production and export figures for end-May today.