KUALA LUMPUR: PublicInvest Research has a neutral outlook on the plantations sector as palm oil inventories rose to a seven-month high of 2.48 miillion metric tonnes (mt) in August on rising production and falling exports.
The research house said CPO exports dropped 8.1% month-on-month following a 6.8% increase in the previous month.
"The unexpected drop was mainly due to most shipments being delayed to the following month to take advantage of the zero export duty, which could yield tax savings of at least RM100/mt.
"For the month of Aug, palm oil exports to China were flat while EU and Pakistan fell 49.0% and 27.4%, respectively. Only India and US markets registered stronger demand, up 5.4% and 44.6%, respectively," it said.
CPO production rose for the second straight months as oil palm trees approach peak season, sometime between the October and November months. Peninsular Malaysia and East Malaysia registered production growth of 6.2% and 9.7% respectively.
Kenanga expects palm oil demand to grow in the next couple of months with Malaysian CPO exports registering massive growth of 63% in the first 10 days of September.
It said the growth will be backed by the current weak ringgit, upcoming festival season, zero export duty and re-stocking activities in China.
"CPO spot prices recovered to the current level of RM2,216/mt after recently falling to a 1-year low of RM2,134/mt. We expect to see CPO prices remaining in the range of RM2,200/mt-2,300/mt in the coming months, dragged by increasing production as oil palm oil trees head into the peak season soon," it said.
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