KUALA LUMPUR: Palm oil stockpiles in Malaysia climbed at the fastest pace in five months as a sharp drop in exports overshadowed weaker production in the world’s second-largest grower.
Inventories in May climbed 5.2% from a month earlier to 2.43 million tonnes, according to data released by the Malaysian Palm Oil Board (MPOB) yesterday.
The gain was more than double the 2.2% rise forecast in a Bloomberg survey.
The buildup reflects a sharp slowdown in overseas shipments as buyers flocked to discounted Indonesian cargoes following Jakarta’s overhaul of its key commodity exports.
Malaysian exports fell about 14% to a one-year low of 1.11 million tonnes, compared with estimates for a 6.2% drop.
While there were initial expectations that the new Indonesian regime – announced late last month – would divert demand to Malaysia, that has yet to materialise. Instead, buyers in key markets including India and China have been scooping up more attractively priced Indonesian supplies.
Competition between the two neighbouring countries may intensify in the coming months as Indonesia tightens export controls.
The top producer, which supplies more than half the world’s palm oil, began a transition phase this month and is still ironing out key operational details, with a review due in three months.
Companies can continue conducting transactions for now, which has created an incentive for refiners and exporters to push out supplies before tighter controls are enforced.
“Indonesian palm oil exporters are willing to ship as much palm oil as they can before the new export monitoring system starts operating at full scale,” said Anilkumar Bagani, head of research at Mumbai-based Sunvin Group.
Malaysia is facing intense competition from Indonesia, which is selling cheaper-priced processed palm products, he said, and could further push up stockpiles.
Palm oil buyers may also be looking to boost inventories in the next two months ahead of anticipated supply tightness from Indonesia’s B50 biodiesel mandate and El Nino weather, which could hurt Asian oilseed production, according to Bagani.
Malaysia’s crude palm oil production, meanwhile, fell 7% to 1.52 million tonnes, according to MPOB, compared with estimates for a 4.9% decline. Imports slumped 42% to 43,816 tonnes, the data showed.
Investors are also watching Malaysian cargo surveyor data for the first 10 days of June, due to be released later yesterday, for clues on how buyers are reacting to Indonesia’s new rules. AmSpec Agri reported a small increase in exports of 4.9% for the period. — Bloomberg
