plantation sector 160211
TRANSCRIPT
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PLANTATION SECTOR
Palm oil inventory down 12.4% MoM in January
OVERWEIGHT
Malaysian Palm Oil Board (MPOB) has released the country’s palm oil statistics for January 2016. Palm oil
inventory in Malaysia continued to decline for the second month in the row. Stockpi les of palm oil in Malaysia shrankby 12.4% from 2.63mil tonnes in December 2015 to 2.31mil tonnes in January 2016. This was marginally below
consensus estimate of 2.33mil tonnes.
The MoM contraction in palm oil inventory in January can be attributed to declines in product ion and imports. Palm
oil imports eased by 47.7% MoM and 52.0% YoY to 43,133 tonnes in January 2016.
However going forward, we believe that downstream companies in Malaysia would increase imports o f CPO from
Indonesia as the Malaysian government has loosened the curbs on imports. The cheaper cost of raw materialsfrom Indonesia would help oleochemical companies compete better with synthetic chemicals, which are madefrom crude oil derivatives.
Malaysia’s CPO produc tion con tracted by 19.3% MoM and 2.7% YoY to 1.13mil t onnes in January 2016. We believe
that oil palm trees in the country are suffering from the lagged impact of El Nino. CPO output in Sabah plunged by
21.8% from 432,288 tonnes in December to 338,074 tonnes in January whi le CPO production in Peninsular Malaysia
shrank by 17.1%. In Sarawak, CPO output decl ined by 20.5% to 234,074 tonnes in January 2016.
MPOB has forecast Malaysia’s CPO product ion to inch up 0.7% from 19.96mil t onnes in 2015 to 20.1mil tonnes
in 2016F. Indonesia Palm Oil Association has estimated the country’ s CPO outpu t to expand from 32.5mil t onnes
in 2015 to a range of 33mil to 35mil t onnes in 2016F.
Malaysia’s palm o il exports fell by 13.8% MoM but improved 7.4% YoY to 1.28mil t onnes in January 2016. The 7.4%
YoY expansion in exports in January was due to a 64.4% surge in India’s purchases. European Union (EU) alsobought 7.4% more palm oil products in January 2016 compared with January 2015. On a negative note, China’s
imports of Malaysian palm oi l plunged by 51.6% YoY to 104,585 tonnes in January 2016.
India’s demand could be tapering off in the short-term as the country has huge stockpiles of edible oil products
currently. As at 1 January 2016, India’s invento ry of vegetable oils stood at 1.11mil t onnes. Of this, about 520,000
tonnes were stockpil es of crude palm oil whi le another 200,000 tonnes were inventory of refined palm oil .
Average CPO price was RM2,251/tonne in January 2016, 4.6% higher than the average pr ice of RM2,150/tonne
recorded in December 2015. Comparing January 2016 against January 2015, average CPO price was 1.9% weaker.
We have assumed that plantation companies with operations in Malaysia would realise an average CPO price of
RM2,400/tonne in 2016F.
Biodiesel exports fell f rom 10,004 tonnes in December 2015 to 61 tonnes in January 2016. On a YoY basis, biodieselexports were 99.5% lower in January 2016. We think that biodi esel exports would remain weak due to competit ion
from fossi l fuel, which is cheaper.
Sector Report
Gan Huey Ling, CFA
603 2036 2305
11 February 2016
The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended
in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer
to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd may from time to time have
a position in or with the securities mentioned herein. Members of the AmBank Group and their affiliates may provide services to any
company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived
from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and
opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability
can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute
our judgement as of this date and are subject to change without notice.
For AmInvestment Bank Bhd
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(A member of the AmBank Group)
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Plantation Sector 11 February 2016
AmInvestment Bank Bhd 2
CHART 1 : CPO PRODUCTION (MILLION TONNES)
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
J a n
- 0 1
M a y
- 0 1
S e p
- 0 1
J a n
- 0 2
M a y
- 0 2
S e p
- 0 2
J a n
- 0 3
M a y
- 0 3
S e p
- 0 3
J a n
- 0 4
M a y
- 0 4
S e p
- 0 4
J a n
- 0 5
M a y
- 0 5
S e p
- 0 5
J a n
- 0 6
M a y
- 0 6
S e p
- 0 6
J a n
- 0 7
M a y
- 0 7
S e p
- 0 7
J a n
- 0 8
M a y
- 0 8
S e p
- 0 8
J a n
- 0 9
M a y
- 0 9
S e p
- 0 9
J a n
- 1 0
M a y
- 1 0
S e p
- 1 0
J a n
- 1 1
M a y
- 1 1
S e p
- 1 1
J a n
- 1 2
M a y
- 1 2
S e p
- 1 2
J a n
- 1 3
M a y
- 1 3
S e p
- 1 3
J a n
- 1 4
M a y
- 1 4
S e p
- 1 4
J a n
- 1 5
M a y
- 1 5
S e p
- 1 5
J a n
- 1 6
Source: MPOB
CHART 2 : CPO INVENTORY (MILLION TONNES)
0.7
1.2
1.7
2.2
2.7
J
a n - 0 1
M
a y - 0 1
S
e p - 0 1
J
a n - 0 2
M
a y - 0 2
S
e p - 0 2
J
a n - 0 3
M
a y - 0 3
S
e p - 0 3
J
a n - 0 4
M
a y - 0 4
S
e p - 0 4
J
a n - 0 5
M
a y - 0 5
S
e p - 0 5
J
a n - 0 6
M
a y - 0 6
S
e p - 0 6
J
a n - 0 7
M
a y - 0 7
S
e p - 0 7
J
a n - 0 8
M
a y - 0 8
S
e p - 0 8
J
a n - 0 9
M
a y - 0 9
S
e p - 0 9
J
a n - 1 0
M
a y - 1 0
S
e p - 1 0
J
a n - 1 1
M
a y - 1 1
S
e p - 1 1
J
a n - 1 2
M
a y - 1 2
S
e p - 1 2
J
a n - 1 3
M
a y - 1 3
S
e p - 1 3
J
a n - 1 4
M
a y - 1 4
S
e p - 1 4
J
a n - 1 5
M
a y - 1 5
S
e p - 1 5
J
a n - 1 6
Source: MPOB
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CHART 3 : CPO EXPORTS (MILLION TONNES)
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
J a n - 0 1
M a y - 0 1
S e p - 0 1
J a n - 0 2
M a y - 0 2
S e p - 0 2
J a n - 0 3
M a y - 0 3
S e p - 0 3
J a n - 0 4
M a y - 0 4
S e p - 0 4
J a n - 0 5
M a y - 0 5
S e p - 0 5
J a n - 0 6
M a y - 0 6
S e p - 0 6
J a n - 0 7
M a y - 0 7
S e p - 0 7
J a n - 0 8
M a y - 0 8
S e p - 0 8
J a n - 0 9
M a y - 0 9
S e p - 0 9
J a n - 1 0
M a y - 1 0
S e p - 1 0
J a n - 1 1
M a y - 1 1
S e p - 1 1
J a n - 1 2
M a y - 1 2
S e p - 1 2
J a n - 1 3
M a y - 1 3
S e p - 1 3
J a n - 1 4
M a y - 1 4
S e p - 1 4
J a n - 1 5
M a y - 1 5
S e p - 1 5
J a n - 1 6
Source: MPOB
CHART 4 : EXPORTS TO CHINA (TONNES)
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
J a n - 0 5
A p r - 0 5
J u l - 0 5
O c t - 0 5
J a n - 0 6
A p r - 0 6
J u l - 0 6
O c t - 0 6
J a n - 0 7
A p r - 0 7
J u l - 0 7
O c t - 0 7
J a n - 0 8
A p r - 0 8
J u l - 0 8
O c t - 0 8
J a n - 0 9
A p r - 0 9
J u l - 0 9
O c t - 0 9
J a n - 1 0
A p r - 1 0
J u l - 1 0
O c t - 1 0
J a n - 1 1
A p r - 1 1
J u l - 1 1
O c t - 1 1
J a n - 1 2
A p r - 1 2
J u l - 1 2
O c t - 1 2
J a n - 1 3
A p r - 1 3
J u l - 1 3
O c t - 1 3
J a n - 1 4
A p r - 1 4
J u l - 1 4
O c t - 1 4
J a n - 1 5
A p r - 1 5
J u l - 1 5
O c t - 1 5
-
Source: MPOB
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CHART 5 : EXPORTS TO INDIA (TONNES)
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
J a n - 0 5
A p r - 0 5
J u l - 0 5
O c t - 0 5
J a n - 0 6
A p r - 0 6
J u l - 0 6
O c t - 0 6
J a n - 0 7
A p r - 0 7
J u l - 0 7
O c t - 0 7
J a n - 0 8
A p r - 0 8
J u l - 0 8
O c t - 0 8
J a n - 0 9
A p r - 0 9
J u l - 0 9
O c t - 0 9
J a n - 1 0
A p r - 1 0
J u l - 1 0
O c t - 1 0
J a n - 1 1
A p r - 1 1
J u l - 1 1
O c t - 1 1
J a n - 1 2
A p r - 1 2
J u l - 1 2
O c t - 1 2
J a n - 1 3
A p r - 1 3
J u l - 1 3
O c t - 1 3
J a n - 1 4
A p r - 1 4
J u l - 1 4
O c t - 1 4
J a n - 1 5
A p r - 1 5
J u l - 1 5
O c t - 1 5
-
Source: MPOB
CHART 6 : EXPORTS TO USA (TONNES)
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
J a n - 0 5
A p r - 0 5
J u l - 0 5
O c t - 0 5
J a n - 0 6
A p r - 0 6
J u l - 0 6
O c t - 0 6
J a n - 0 7
A p r - 0 7
J u l - 0 7
O c t - 0 7
J a n - 0 8
A p r - 0 8
J u l - 0 8
O c t - 0 8
J a n - 0 9
A p r - 0 9
J u l - 0 9
O c t - 0 9
J a n - 1 0
A p r - 1 0
J u l - 1 0
O c t - 1 0
J a n - 1 1
A p r - 1 1
J u l - 1 1
O c t - 1 1
J a n - 1 2
A p r - 1 2
J u l - 1 2
O c t - 1 2
J a n - 1 3
A p r - 1 3
J u l - 1 3
O c t - 1 3
J a n - 1 4
A p r - 1 4
J u l - 1 4
O c t - 1 4
J a n - 1 5
A p r - 1 5
J u l - 1 5
O c t - 1 5
-
Source: MPOB
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CHART 7 : EXPORTS TO EU (TONNES)
60,000
110,000
160,000
210,000
260,000
310,000
J a n - 0 5
A p r - 0 5
J u l - 0 5
O c t - 0 5
J a n - 0 6
A p r - 0 6
J u l - 0 6
O c t - 0 6
J a n - 0 7
A p r - 0 7
J u l - 0 7
O c t - 0 7
J a n - 0 8
A p r - 0 8
J u l - 0 8
O c t - 0 8
J a n - 0 9
A p r - 0 9
J u l - 0 9
O c t - 0 9
J a n - 1 0
A p r - 1 0
J u l - 1 0
O c t - 1 0
J a n - 1 1
A p r - 1 1
J u l - 1 1
O c t - 1 1
J a n - 1 2
A p r - 1 2
J u l - 1 2
O c t - 1 2
J a n - 1 3
A p r - 1 3
J u l - 1 3
O c t - 1 3
J a n - 1 4
A p r - 1 4
J u l - 1 4
O c t - 1 4
J a n - 1 5
A p r - 1 5
J u l - 1 5
O c t - 1 5
-
Source: MPOB
CHART 8 : PRICE DISCOUNT BETWEEN CPO AND SOYBEAN OIL (%) (UP TO DEC 2015)
-45.0%
-40.0%
-35.0%
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
0
200
400
600
800
1,000
1,200
1,400
1,600
J a n - 0 2
A p r - 0 2
J u l - 0 2
O c t - 0 2
J a n - 0 3
A p r - 0 3
J u l - 0 3
O c t - 0 3
J a n - 0 4
A p r - 0 4
J u l - 0 4
O c t - 0 4
J a n - 0 5
A p r - 0 5
J u l - 0 5
O c t - 0 5
J a n - 0 6
A p r - 0 6
J u l - 0 6
O c t - 0 6
J a n - 0 7
A p r - 0 7
J u l - 0 7
O c t - 0 7
J a n - 0 8
A p r - 0 8
J u l - 0 8
O c t - 0 8
J a n - 0 9
A p r - 0 9
J u l - 0 9
O c t - 0 9
J a n - 1 0
A p r - 1 0
J u l - 1 0
O c t - 1 0
J a n - 1 1
A p r - 1 1
J u l - 1 1
O c t - 1 1
J a n - 1 2
A p r - 1 2
J u l - 1 2
O c t - 1 2
J a n - 1 3
A p r - 1 3
J u l - 1 3
O c t - 1 3
J a n - 1 4
A p r - 1 4
J u l - 1 4
O c t - 1 4
J a n - 1 5
A p r - 1 5
J u l - 1 5
O c t - 1 5
(US$/tonne)
CPO price
Soyabean oil price
Discount/premium
Source: MPOB
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CHART 9 : MARKET DEMOGRAPHICS OF CPO FUTURES (%) VS CPO PRICE (RM/TONNE) (UP TO DEC 2015)
1,000
1,500
2,000
2,500
3,000
3,500
4,000
0
5
10
15
20
25
30
35
40
45
50
J a n - 0 7
M a r - 0 7
M a y - 0 7
J u l - 0 7
S e p - 0 7
N o v - 0 7
J a n - 0 8
M a r - 0 8
M a y - 0 8
J u l - 0 8
S e p - 0 8
N o v - 0 8
J a n - 0 9
M a r - 0 9
M a y - 0 9
J u l - 0 9
S e p - 0 9
N o v - 0 9
J a n - 1 0
M a r - 1 0
M a y - 1 0
J u l - 1 0
S e p - 1 0
N o v - 1 0
J a n - 1 1
M a r - 1 1
M a y - 1 1
J u l - 1 1
S e p - 1 1
N o v - 1 1
J a n - 1 2
M a r - 1 2
M a y - 1 2
J u l - 1 2
S e p - 1 2
N o v - 1 2
J a n - 1 3
M a r - 1 3
M a y - 1 3
J u l - 1 3
S e p - 1 3
N o v - 1 3
J a n - 1 4
M a r - 1 4
M a y - 1 4
J u l - 1 4
S e p - 1 4
N o v - 1 4
J a n - 1 5
M a r - 1 5
M a y - 1 5
J u l - 1 5
S e p - 1 5
N o v - 1 5
Foreign Institutions
Domestic Retail
CPO price
Source: Bursa Malaysia
CHART 10 : CPO INVENTORY (MILLION TONNES) VS CPO PRICE (RM/TONNE)
0
0.5
1
1.5
2
2.5
3
3.5
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
J a n - 0
1
J u n - 0
1
N o v - 0
1
A p r - 0 2
S e p - 0
2
F e b - 0
3
J u l - 0 3
D e c - 0
3
M a y - 0
4
O c t - 0 4
M a r - 0 5
A u g - 0
5
J a n - 0
6
J u n - 0
6
N o v - 0
6
A p r - 0 7
S e p - 0
7
F e b - 0
8
J u l - 0 8
D e c - 0
8
M a y - 0
9
O c t - 0 9
M a r - 1 0
A u g - 1
0
J a n - 1
1
J u n - 1
1
N o v - 1
1
A p r - 1 2
S e p - 1
2
F e b - 1
3
J u l - 1 3
D e c - 1
3
M a y - 1
4
O c t - 1 4
M a r - 1 5
A u g - 1
5
J a n - 1
6
CPO price
CPO stocks
Average in vento ry
Source: MPOB
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CHART 11 : CPO PRICE (RM/TONNE) VERSUS CRUDE OIL (US$/BARREL)
1,500
2,000
2,500
3,000
3,500
4,000
20
40
60
80
100
120
140
J a n - 0 7
J u n - 0 7
N o v - 0 7
A p r - 0 8
S e p - 0 8
F e b - 0 9
J u l - 0 9
D e c - 0 9
M a y - 1 0
O c t - 1 0
M a r - 1 1
A u g - 1 1
J a n - 1 2
J u n - 1 2
N o v - 1 2
A p r - 1 3
S e p - 1 3
F e b - 1 4
J u l - 1 4
D e c - 1 4
M a y - 1 5
O c t - 1 5
Crude oil CPO price
Source: MPOB, Bloomberg
CHART 12 : HISTORICAL CPO PRICE CYCLE (RM/TONNE)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
J a n - 8 7
J a n - 8 8
J a n - 8 9
J a n - 9 0
J a n - 9 1
J a n - 9 2
J a n - 9 3
J a n - 9 4
J a n - 9 5
J a n - 9 6
J a n - 9 7
J a n - 9 8
J a n - 9 9
J a n - 0 0
J a n - 0 1
J a n - 0 2
J a n - 0 3
J a n - 0 4
J a n - 0 5
J a n - 0 6
J a n - 0 7
J a n - 0 8
J a n - 0 9
J a n - 1 0
J a n - 1 1
J a n - 1 2
J a n - 1 3
J a n - 1 4
J a n - 1 5
J a n - 1 6
Source: MPOB