EU’s palm oil ban dampening industry’s near-term prospects

EU’s palm oil ban dampening industry’s near-term prospects — Analysts
BY YVONNE TUAH ON APRIL 4, 2019, THURSDAY AT 12:11 AM BUSINESS


Looking ahead, the research team expect the upcoming results season in May to see a sequential recovery in most planters’ earnings as improvements in CPO prices likely outweighed a seasonal drop in FFB output in 1QCY19.



KUCHING: The European Union’s (EU) ban on palm oil will dampen near-term prospects of planters despite some positive factors developing domestically in the plantation sector.

The research team at Kenanga Investment Bank Bhd (Kenanga Research) said while some positive factors are developing in the plantation sector, negative news flows have diffused negative sentiments and weighed on CPO prices, dampening near-term prospects of planters under its coverage.

“In addition, stockpiles have not eased as quickly as we had hoped in the January to February 2019 period, no thanks to shorter working month during Chinese New Year,” it said in its sector report outlook yesterday.

However, it pointed out that as the negative news flows subside in coming months, it believed crude palm oil (CPO) price will return to the recovery trajectory.

“Over the next three months, key positive factors that we are monitoring closely are as follows easing stockpiles in both Malaysia and Indonesia, higher exports to China given its pledge to buy 50 per cent more palm oil from Malaysia, and further clarity on new biodiesel initiatives (B30 in Indonesia and B20 in Malaysia).

“Nevertheless, we believe these positive factors have been largely priced in with the KLPLN index staging a handsome 11 per cent recovery from the low in December 2018,” it added.

Currently, it noted that planters under its coverage are on average trading at minus one standard deviation (range: minus two to 0.5 SD) from their respective mean PER, which is consistent with the uncertain environment but lacks comfortable margin of error to turn positive on the sector at this juncture.

“However, should the biodiesel initiatives and palm oil offtake from the Chinese pan out better than expected, we would relook our valuation basis with an upward bias. On the other hand, if the EU and the Philippines’ palm oil biodiesel ban escalates further, we are likely to downgrade our CPO price assumption,” Kenanga Research said.

Looking ahead, the research team expect the upcoming results season in May to see a sequential recovery in most planters’ earnings as improvements in CPO prices likely outweighed a seasonal drop in FFB output in 1QCY19.

“This has also been verified by several planters under our coverage. Furthermore, from our observation of the movement of daily futures curves in the past two quarters, we believe the average CPO price realised by planters could have improved by five to six per cent or more in 1Q19,” it added.

Despite expected improvements in CPO prices, Kenanga Research maintained its ‘neutral’ outlook on the plantation sector as it believed the positive developments have been largely priced in with the KLPLN index staging a handsome 11 per cent recovery from the low in December 2018.

“However, should the biodiesel initiatives and palm oil offtake from the Chinese pan out better than expected, we would relook our valuation basis with an upward bias. On the other hand, if the EU and the Philippines’ palm oil biodiesel ban escalates further, we are likely to downgrade our CPO price assumption,” it added.


https://www.theborneopost.com/2019/04/04/eus-palm-oil-ban-dampening-industrys-near-term-prospects-analysts/

Ministry proposes cap on oil palm plantations

MARCH 6, 2019 BUSINESS




KUALA LUMPUR: The Ministry of Primary Industries will be presenting a proposal to the Cabinet this month to cap the maximum area for oil palm plantations at about 6.5 million hectares, up from the 5.85 million hectares as at end-2018.

Minister Teresa Kok said this was expected to be achieved by 2023 based on the average annual expansion of plantations from 2013 to 2018.

“This move was made in order to dismiss accusations that oil palm plantations are the reason for deforestation.

“But, in order to achieve this, we have to work with various state governments,” she said when officiating the 30th annual Palm and Lauric Oils Conference and Exhibition, Price Outlook 2019 Conference and Exhibition (POC 2019) yesterday.

Kok said palm oil players should also improve the research and development of seedlings, as well as boosting the productivity and yields of existing oil palm tree.

Kok said the ministry would also propose to the cabinet to compel information on the areas under oil palm plantations to be made public.

“We need to be transparent. We hope the cabinet will approve the proposal,” she said.

Meanwhile, Kok said the government’s effort this year to expand the B10 and B7 bio-diesel programmes to the transport and industrial sectors was expected to raise palm oil consumption by 761,000 tonnes annually.

“This will help reduce the huge stockpile and lift the commodity prices,” she added. — Bernama

Southern Acids strikes cautiously optimistic note

By Ooi Tee Ching

Published: 2012/09/27

SUBANG JAYA: Southern Acids (M) Bhd is cautiously optimistic of its business prospects as its oil palm estates in Indonesia and oleochemical operations in Malaysia suffer from the impact of Indonesia's palm oil tax restructure.

Since August 2011, the Indonesian government has raised palm oil export taxes drastically to boost refining capacity and downstream activities there.

"With cheaper feedstock available to Indonesia's oleochemical producers, the playing field is no longer level," said chairman Tan Sri Low Boon Eng.

"Our oleochemical manufacturing business here suffered substantial margin erosion," he said after the company's shareholders' meeting here yesterday.
Southern Acids operates a 100,000-tonne-a-year oleochemical plant in Kapar, Klang. Its products are mainly exported to Europe, East Asia and South Asia.

Last month, the Palm Oil Refiners Association of Malaysia (Poram) highlighted that the Malaysian government, in allowing five million tonnes of duty-free crude palm oil exports and remaining indifferent towards the plight of palm oil refiners here, had risked the loss of further investment and talent in its oleochemical, specialty fats and biodiesel sectors.

Poram said the government's indecision for the past 12 months had eroded investors' confidence to further value add Malaysia's palm oil downstream sector. This also meant opportunity loss in retaining and attracting highly-skilled knowledge workers.

Low concurred with Poram that the government needs to take a more discerning approach. "The government must do something about the current situation. It has been more than a year already," he said.

Southern Acids, via PT Mustika Agro Sari and PT Wanasari Nusantara, has 7,870ha of oil palm plantations in Indonesia.

Low noted the Indonesia's palm oil tax restructure, in encouraging downstream investment there, had pulled down palm oil prices. "So, our oil palm plantation and milling business had to contend with lower selling prices," he said.

Despite operating in challenging circumstances caused by the restructure of Indonesian palm oil taxes, Low said the group is cautiously optimistic of remaining profitable in the current year ending March 2013.

"We'll continue to focus on our Indonesian operations. So far, we've planted up around 4,700ha. We'll continue to embark on new planting and replanting in Riau," he said.

Read more: Southern Acids strikes cautiously optimistic note http://www.btimes.com.my/Current_News/BTIMES/articles/sab/Article/#ixzz27gA0jrqB

Leveraging on palm oil innovation

By Marina Emmanuel

Published: 2010/09/27

The field is now wide open for Malaysia's palm oil mills to step up the value-chain in providing millions of tonnes of palm oil and oil-palm biomass for value-added downstream activities.

AT THE opening of Sabah's first palm-pressed fibre oil exraction plant in the once-thriving timber town of Keningau last week, the state's Minister of Industrial Development Datuk Raymond Tan Shu Kiah imparted some valuable lessons in value-adding and leveraging on new technologies as sources of generating wealth.

Using the example of how Penang-based Eonmetall Group Bhd has helped Malaysia gain a foothold to lead in palm oil innovations by developing and holding the patent on palm pressure fibre oil technology, Tan inspired confidence among those present at the event - that Sabah can now tap technology by turning waste into "gold".
For a town like Keningau, which once rode the logging boom until the late 1980s when its timber resources were depleted, the fact that palm oil estates have appeared in some parts recently should help the local economy.

The extraction technology developed by Eonmetall is used to recover 5 per cent residual oil content from palm-pressed fibre. This oil is traditionally used as boiler fuel in more than 420 palm oil mills dotting the country.

Eonmetall last Thursday delivered the extraction plant to Kim Loong Oil Mill, which is being viewed as a stepping stone to tap Sabah's estimated 122 palm oil mills.

Kim Loong is no stranger to maximising profits by extracting values out of crude palm oil (CPO) and palm oil mill wastes. 

Its palm oil mill in Johor is being touted as the first registered methane emission reduction clean development mechanism (CDM) project in the world for biogas generated from palm oil mill effluents.

The company's first solvent extraction plant in Johor, which was also developed by Eonmetall, serves as what is believed to be the world's first.

From the time the Johor facility was commisioned in September 2007 to July this year, the facility has produced a total of 4,513 tonnes of solvent- extracted red palm oil worth a total of RM11 million, which would have otherwise been burnt and lost in the boilers of a conventional palm oil mill.

Malaysia and Indonesia are expected to jointly produce an estimated CPO output of 37 million tonnes this year.

Kim Loong Resources Bhd's group executive chairman Gooi Seng Lim notes that if the palm fibre oil extraction technology can be successfully implemented in both countries, there is a potential for 925,000 tonnes of red palm oil that can be recovered.

And the total value of the red palm oil at today's price of RM2,700 per tonne would translate into a whopping revenue of RM2.5 billion.

With the unleashing of the palm fibre oil extraction technology, the number of downstream applications which can be developed is countless and not limited only to palm oil entrepreneurs, but other industries as well.

The field is now wide open for Malaysia's palm oil mills to step up the value-chain in providing millions of tonnes of palm oil and oil-palm biomass for value-added downstream activities.

Innovation has always been the trademark of successful entrepreneurs and what better way is to turn "useless into useful" while sparing the environment in the process.

Read more: Leveraging on palm oil innovation http://www.btimes.com.my/Current_News/BTIMES/articles/mon27/Article/index_html#ixzz1fhaqiO8a

Palm oil sector aims for RM170b earnings

Palm oil sector aims for RM170b earnings

By Zaidi Isham Ismail
Published: 2010/08/05

Malaysia, which is the world's second largest palm oil producer, aims to more than triple its earnings in the sector to an estimated RM170 billion by 2020.

The commodity contributed RM49.5 billion in export earnings in 2009 or 7.5 per cent of the country's gross domestic product.

Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said out of the RM170 billion, the upstream, downstream and biodiesel expansion is expected to provide new business opportunities estimated at RM74.6 billion by 2020.

"The government has accorded this industry as the country's second most important sector after oil and gas under the 12 National Key Economic Areas.

"So, we will continue to provide the necessary enabling framework including investments in the necessary infrastructure and supporting facilities such as ports, bulking installations and research and development facilities," Dompok said in his speech in Kuala Lumpur yesterday during the 2010 Palm Oil Industry Award dinner.

Read more: Palm oil sector aims for RM170b earnings http://www.btimes.com.my/Current_News/BTIMES/articles/POPILA/Article/#ixzz0xyja4Kmg

Plantation workers’ permit extended for five more years

Plantation workers’ permit extended for five more years
May 31, 2010

KUALA LUMPUR, May 31 — The government has given the green light for the extension of the permit for foreign workers who have worked for five years in the oil palm plantation sector, Deputy Prime Minister Tan Sri Muhyiddin Yassin said.

He said the extension, for five more years, was to address the shortage of workers in the sector.

“The government is concerned over the shortage of workers in the plantation sector, especially in the oil palm sub-sector.

“The government is aware that if drastic measures are not taken to address the problem, it will affect the productivity and competitiveness of this sub-sector,” he said in a statement.

He said plantations were among the sectors which relied heavily on foreign workers due to the lack of interest among the locals workers. — Bernama

http://www.themalaysianinsider.com/malaysia/article/plantation-workers-permit-extended-for-five-more-years/

The palm oil paradox

The palm oil paradox

Palm oil is produced from the oil palm, a tropical species from West Africa that is a highly productive and profitable source of vegetable oil. Its origin—West Africa—makes it well-suited to the tropics and therefore an attractive crop to promote rural agricultural development. But oil palm expansion has often come at a cost to the environment — more than half of new plantations established in Malaysia and Indonesia between 1990 and 2005 occurred at the expense of natural forests. As such, palm oil has been targeted by environmentalists and scientists concerned about biodiversity loss, greenhouse gas emissions, and pollution. Further, the palm oil industry has been challenged by land rights issues, since expansion is occurring in areas where communities may traditionally use forests but lack title to land. New development in these areas spurs charges of land-grabbing and can exacerbate social conflict.



There are other ways to mitigate the impact of oil palm expansion. A new review, published in CAB Reviews, examines some of the options, including setting aside high value conservation areas, land-use advocacy, compensating forest carbon stocks and biodiversity, and enhancing regulation and enforcement. Betsy Yaap et al (2010). Mitigating the biodiversity impacts of oil palm development. CAB Reviews: 5, No. 019. (Photo: Data from FAOstat)

http://news.mongabay.com/2010/0325-palm_oil_rspo.html

Plantation sector rating cut to neutral from overweight

http://www.theedgemalaysia.com/business-news/153204-PLANTATION%20[%3Cspan%20class-


Plantation sector rating cut to neutral from overweight

Tags: CPO price | Crude Oil | Genting Plantations Bhd | Indofood Agri-Resources Ltd | IOI Corp Bhd | Kuala Lumpur Kepong Bhd | Kulim (Malaysia) Bhd | neutral | plantation sector | Sarawak Oil Palms Bhd | TH Plantations Bhd | Wilmar International Ltd

Written by AmResearch
Monday, 09 November 2009 10:43

WE HAVE downgraded the PLANTATION [] sector from overweight to neutral. In addition, we have revised our recommendations on IOI CORPORATION BHD [] (IOI), KUALA LUMPUR KEPONG BHD [] (KLK), Wilmar International Ltd and Indofood Agri-Resources (IndoAgri) from buys to holds.


Earning estimates trimmed; fair values cut
Due to our lower average CPO price assumption for 2010F, we have revised earnings forecasts for companies under our coverage downwards by 4% to 11%, with the exception of SARAWAK OIL PALMS BHD [] (SOP). Despite this downward revision in our earnings estimates, EPS growth for FY10F will still be positive, driven by production growth and a low base effect in FY09F. Recall that earnings of bigger-caps like IOI and KLK in FY09F were affected by forex losses, provisions and lower manufacturing contribution resulting from writedowns.


CPO price assumption lowered to RM2,300/tonne
A result of our recent visits to companies under our coverage is that we are taking a more conservative stance on crude palm oil’s (CPO) pricing cycle — moving into 2010. We now expect prices of CPO to oscillate around RM2,300 per tonne — from our previous assumption of RM2,500/tonne. This implies that CPO prices are expected to remain somewhat flattish in 2010F.

Demand expansion may not keep pace with exceptionally strong supply growth from bumper harvests. We see demand and supply dynamics for CPO turning less favourable — pointing towards potential inventory imbalances — thus putting a cap on prices.

Supply concern is admittedly not new but this time around, we believe production will surprise on the upside due to: (1) A combination of expected normalisation in fresh fruit bunches (FFB) yields off depressed levels this year; and (2) Maturing acreage in 2010F. We reckon that FFB output could rise between 8% and 10% next year.

FFB production this year was affected by low yields resulting from poor fruit pollination and heavy rainfall. We think that palm oil inventory will range between 1.8 and two million tonnes next year — exerting downward pressure on CPO prices.

From January 2001 to September 2009, Malaysia’s average palm oil inventory was about 1.4 million tonnes per month. Average palm oil inventory for the past three years has been roughly 1.6 million tonnes/month while average stock usage was 1.3 times. We reckon that with a higher inventory level, stock usage could rise to 1.4 times to 1.5 times next year.