PETALING JAYA: Crude palm oil (CPO) futures rose to a two-week high
yesterday on expectations of higher overseas demand for the commodity.
Meanwhile, the rally on the local rubber market cooled down as
China’s purchases of rubber slowed ahead of the Chinese New Year
celebration next week.
The benchmark April CPO futures contract
advanced RM12 to close at RM2,510 per tonne. Tyre-grade Standard
Malaysian Rubber (SMR) 20 added one sen to RM10.09 per kg and
Latex-in-Bulk rose 35 sen to RM6.98 per kg respectively.
On the performance of CPO, a
trader expects the high palm oil end-stockpiles in December of about
2.24 million tonnes could be substantially reduced in January, given
higher overseas demand.
Independent cargo surveyors recently
reported a 23.9% month-on-month increase in local palm oil exports for
January. The Malaysian Palm Oil Board is expected to release its January
2010 statistics on stocks, production and export next week.
Citi
Investment Research analyst Penny Yaw said in the firm’s latest
plantation report that the average CPO price year-to-date was around
US$740 or RM2,498 per tonne.
“We forecast CPO prices will average
US$760 from the previous estimate of US$650 per tonne in 2010 and
US$800 per tonne from the previous estimate of US$500 in the long term,
factoring in favourable demand and supply interplay,” she said.
Oil
World has forecast demand to outstrip supply growth in the major world
oils and fats markets.
In addition, the world climate change
could affect water availability, leading to droughts and floods which
would take a toll on crops.
China and India, which account for
30% of world consumption of edible oils, are vulnerable to extreme
weather changes.
Any potential shortfall in supply would have a
positive impact on prices of vegetable oils, Yaw said.
Other key
factors supporting CPO prices include slower production due to active
replanting in Malaysia, the impact of El Nino in the coming months and
expectations of a weaker US dollar which may lead to higher commodity
prices.
As for rubber, Jupiter Securities head of research Pong
Teng Siew said: “It will be interesting to know whether demand from
China, the world’s largest rubber importer, will continue without its
government stimulus spending measures.”
He said China was seen
stockpiling on rubber since late last year but has since gradually
slowed down, adding that it could be due to the upcoming Chinese New
Year festival where most of its automotive plants would shut down for
the celebration.
“It is said that most governments’ stimulus
packages would have come to an end by the first half of 2009. My concern
is that once China’s stimulus package stops, what will happen to the
big demand for commodities like rubber and CPO?” Pong said.
A
rubber trader told StarBiz that world rubber prices would not
likely fall significantly this year amid the current tight supply
situation.
Furthermore, the three major producing nations –
Thailand, Indonesia and Malaysia – have plans to limit the drop in
rubber prices should it fall below US$2 per kg.
“These countries
will make sure that rubber price stays above US$2 per kg to ensure that
the price is higher that the cost of production of their rubber
smallholders,” the trader said.
Thailand is proposing to other
producing nations not to sell rubber should the price fall below US$2.60
per kg.
Source : The Star by Hanim Adnan
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