Malaysia: Palm oil exports will pick up, slowing gain in inventory — analysts

Palm oil exports will pick up in the months ahead thanks to steady prices, partly helping to ease concerns over swelling inventory from rising output in Malaysia, analysts said.

Most research houses, however, are staying neutral on the plantation sector following the release of the latest data showing an eight-month high inventory in Malaysia and flagged margin pressures on producers from elevated fertiliser costs.

Stockpiles in the world’s largest producer of the vegetable oil will likely remain around two million tonnes in June as seasonally higher crop yields are expected to be offset by potentially stronger demand from India, said Hong Leong Investment Bank.

India, the world’s top importer of edible oil including palm oil, halved the import duty on crude palm oil to 10% in a decision widely seen as positive for the commodity.

Prices of the highly versatile oilseed used in everything from lipstick to diesel have come off its peak amid worries over demand at a time of rising output. The benchmark crude palm oil (CPO) futures was trading at RM3,836 on Bursa Malaysia Derivatives.

Bursa Malaysia Plantation Index, which tracks 43 stocks in the sector, has recovered from its lows in April during the global market turmoil but is still down nearly 6% when compared to the end of 2024.

“Ample global vegetable oil supplies combined with a seasonal increase in palm oil production, especially during the peak harvest months in Southeast Asia, are expected to limit further price gains,” said TA Securities.

Both HLIB and TA Securities kept their ‘neutral’ stance on the sector.

For MIDF Amanah Investment Bank, margins in the sector are likely to remain under pressure due to the persistent elevated cost of production from higher locked-in fertiliser costs.

Malaysia reported that its inventory expanded for a third consecutive month, growing nearly 7% to 1.99 million tonnes in May. Month-on-month, exports surged 26% to 1.39 million tonnes in May but were overshadowed by a 5% rise in output to 1.77 million tonnes on the back of seasonal recovery.