Palm-oil shipments from Indonesia, the world’s largest producer, are poised to advance 9 percent this month as importers increase purchases before the Muslim fasting season of Ramadan starts in July.
Exports may gain to 1.63 million metric tons from 1.49 million tons in April, according to the median in a Bloomberg News survey. Production will increase to 2.1 million tons from 1.9 million tons, while stockpiles were little changed at 1.85 million tons, the survey showed. Five plantation and refining company executives contributed to the output survey and four gave estimates for exports and inventories.
Prices have declined 15 percent from a 13-month high in April on concern that demand in China, the biggest consumer of cooking oils, may weaken as the economy slows, and as Europe’s debt crisis worsens. Exports from Malaysia, the second-largest producer, gained 2.4 percent to 1.38 million tons this month, Intertek said today. Price gains may boost revenues for companies including PT Astra Agro Lestari (AALI) and Golden Agri-Resources Ltd. (GGR), the world’s second-largest grower.
“Buyers from Pakistan, Bangladesh and the Middle Eastern countries have started to increase stockpiles ahead of Ramadan and Eid al-Fitr” festival, said Susanto, head of marketing at the Indonesia Palm Oil Association. Consumption of cooking oils climbs during Ramadan as followers break daylong fasts with communal meals. Eid al-Fitr marks the end of the fasting month.
Futures dropped 0.4 percent to 3,099 ringgit ($976) a ton on the Malaysia Derivatives Exchange by 5:25 p.m. local time. The price has plunged 11 percent this month, the most since September 2009. China has no plan to introduce stimulus to support growth on the scale unleashed during the global credit crisis in 2008, state-run Xinhua News Agency has said.
The Chinese government “might have some stimulus measures but they wouldn’t be big and there are concerns that demand might suffer,” said Ryan Long, vice president of futures and options at OSK Holdings Bhd. in Kuala Lumpur. China may grow 8.2 percent this year, the slowest pace since 1999, a Bloomberg survey shows, as Europe’s crisis curbs exports and manufacturing.
Analyst Pawan Kumar of Rabobank International expects demand for palm oil, used to make everything from candy bars to biofuels, to be sustained.
“Long-term demand for palm oil will continue to rise as a result of population growth and economic development in emerging Asian economies,” Kumar, the bank’s senior analyst in Singapore, said in a report May 24. “Palm oil will see strong demand from developed economies, driven by the industrial use of palm oil products such as oleochemicals and biodiesel.”
Rabobank expects global vegetable-oil consumption to reach as much as 180 million tons by 2020, of which about 68 million tons will come from palm oil. Malaysia and Indonesia account for about 89 percent of the oil’s global shipments.
Companies are increasing refining capacity in Indonesia to benefit from a cut in export taxes for processed oil which took effect last year, Adrian Foulger, head of food & beverage research at Standard Chartered Plc, said May 8.
In October, Indonesia cut maximum export duties on refined, bleached and deodorized palm oil to 10 percent from 23 percent. The rate for RBD palm olein was reduced to 13 percent from 25 percent, while the highest tax for crude palm-oil exports was set at 22.5 percent.
Exports of refined palm oil may rise this year to benefit from the lower taxes, Sahat Sinaga, second deputy chairman of the Indonesian Palm Oil Board, said May 28. Shipments will reach about 5 million tons in the first half from 2.6 million tons a year earlier, he said. Refining capacity will probably increase to 25 million tons next year from 18.5 million tons as new plants are built and existing operations are expanded, he said.
Wilmar International Ltd. (WIL), the world’s biggest palm-oil processor, plans to spend more than $100 million to boost refining capacity in the country by 50 percent, Chief Operating Officer Martua Sitorus said on May 10.
Indonesia will keep the tax rate for crude palm-oil exports unchanged at 19.5 percent in June, Deddy Saleh, director general of foreign trade at the Trade Ministry, said today. The base price to calculate the levy exporters must pay will be cut to $1,098 a ton from $1,120 per ton in May, he said.
Indonesia’s production is set to climb 6.4 percent to 25 million tons this year, while exports may gain 9 percent to as much as 18 million tons, according to the Indonesia Palm Oil Association. Output may climb to 26.4 million tons in the year that begins Oct. 1, from an estimated 25 million tons a year earlier, the U.S. Department of Agriculture’s Foreign Agricultural Service said April 17.
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