Malaysia’s palm oil exports could decline for a third consecutive month in June if buyers turn to discounted Indonesian supplies before Jakarta fully centralises palm oil exports, The Star wrote.
The Indonesian government launched a centralised export system for palm oil, coal and ferro alloys on 1 June, with producers expected to start submitting sales figures to the new state-owned firm Danantara Sumberdaya Indonesia (DSI), the 5 June report said.
During a transitional phase, companies would be allowed to keep handling transactions until DSI took over specific export activities as early as September, or by 1 January at the latest, senior officials were reported as saying.
Despite initial expectations that the new Indonesian rules would divert demand to Malaysia, that had not happened to date as key importers, particularly in India, had already made ample purchases in the first quarter, according to Paramalingam Supramaniam, a director at Selangor-based brokerage Pelindung Bestari.
“If Indonesia starts pushing out more exports until the new policy is fully implemented, that would intensify competition with Malaysia and weigh on its shipments,” he said.
A shift to purchases from Indonesia could put pressure on Malaysian palm oil futures, which had been hit by sluggish exports and softer energy prices that had reduced the oil’s appeal for biofuel, The Star wrote.
Indonesian palm oil is currently more attractively priced than Malaysian supplies, giving the country room to capture market share, according to traders quoted in the report.
In May, Malaysian exports fell by 6.2% compared to the previous month to 1.22M tonnes, according to the median average of 11 estimates in a Bloomberg survey of plantation executives, traders and analysts. The volume was the lowest level since February and followed a 14% drop in April.
According to latest May figures published by the Malaysian Palm Oil Board (MPOB) on 10 June and reported by The Star on the same day, palm oil stockpiles in Malaysia – the world’s second largest producer of the commodity - climbed at the fastest pace in five months as a sharp drop in exports overshadowed weaker production.
The gain was more than double the 2.2% rise forecast in the Bloomberg survey.
Inventories in May climbed 5.2% compared to the previous month to 2.43M tonnes, MPOB said.
According to MPOB data, Malaysian exports in May fell about 14% to a one-year low of 1.11M tonnes, compared with estimates of a 6.2% drop.
Malaysian crude palm oil (CPO) production in May fell 7% to 1.52M tonnes, according to MPOB, compared with estimates for a 4.9% decline. Imports dropped by 42% to 43,816 tonnes in the month, the data showed.
“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,” Anilkumar Bagani, head of research at Mumbai-based Sunvin Group, was quoted as saying.
Malaysia was facing intense competition from Indonesia, which was selling cheaper-priced processed palm products, he said.
However, some industry sources remained positive about the outlook for Malaysian exports.
“For June, exports will recover mainly due to easing prices in May, prompting major importers to restock after two previous months of a slowdown in buying,” said Sathia Varqa, a senior analyst with Fastmarkets Palm Oil Analytics in Singapore.
“Uncertainty over the Indonesian export policy could also propel increased purchases from Malaysia.”
