Wednesday, 6 March 2013

Plantation Sector - Key Takeaways from Palm Oil Conference Day 1 OVERWEIGHT

- Topics on the first day of Palm Oil Conference 2013 related mainly to hedging and downstream industries such as biodiesel and oleochemicals.

- In terms of CPO price forecasts, two speakers predicted average prices of RM2,200/tonne and RM2,500/tonne for 2013F while one speaker was more optimistic, with a projection of a range of RM2,500/tonne to RM3,200/tonne.

- A lauric oils expert said that high palm oil inventories at producing and destination countries would continue to exert downward pressure on CPO prices. He opined that in spite of low vegetable oil prices, the case for biodiesel is not expected to be favourable due to the anti-dumping duties imposed by European Union (EU) and the need for biodiesel to be certified as sustainable.

- A biodiesel expert is of the same view. Although global biodiesel production amounted to almost 23mil tonnes in 2012, this was only about 46% of total production capacity of roughly 50mil tonnes.

- Biodiesel accounted for 14% of usage of vegetable oils and 5% of consumption of palm oil in 2011/2012. EU accounted for almost all of biodiesel imports in 2012 and these came mainly from Argentina and Indonesia. Argentina exported about 1.65mil tonnes of biodiesel last year while Indonesia exported almost 1.37mil tonnes.

- Another speaker believes that demand for palm oil could surprise on the upside in 2013F.

- This is due to the large amount of downstream production capacity coming on-stream in Asia in 2013F. About six fatty alcohol plants with total production capacity of 600,000 tonnes/year are expected to commence operations this year.

- These include Wilmar’s 144,000 tonnes/year plant in Gresik and Zhejiang Jiahua Energy Chemical industry’s plant in China, which is expected to command capacity of 135,000 tonnes/year.

- These oleochemical plants are envisaged to increase demand for palm oil, which is the feedstock for the fatty acid and alcohol plants.

- Including projects out of Asia, global production of fatty alcohol is estimated to expand by more than 830,000 tonnes/year in 2013F. These include Wilmar-Huntsman’s plant of 150,000 tonnes/year in Rotterdam and Sabic’s 83,000 tonnes/year plant in Saudi Arabia.

Source: AmeSecurities

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