Malaysia’s palm oil inventory level continued to climb to 1.45 million tonnes (+11% month-on-month; -13.9% year-on-year) in August 2007, from 1.31 million tonnes as at the end July 2007.
The rising inventory level was mainly due to a strong recovery in August production (+14.8% month-on-month; +1.4% year-on-year), while exports grew by 11.7% month-on-month albeit on a lower base.
On a year-on-year basis, exports shrank 5.5%. With the exception of China, which registered strong import figures (+36.7% month-on-month; +1.5% year-on-year), the other major importing countries from Malaysia like US, India and European Union suffered contractions.
Year-to-date (YTD) exports contracted by 8.2% y-o-y to 8.4 million tonnes as demand were affected by high palm oil prices.
Inventory expected to rise much faster as production is registering a spectacular recovery. Although YTD production is still down by 5.7% y-o-y, it has registered a significant pick up in the second half of this year (2H07), having narrowed from -8% as at June. After six months (since February 2007) of continuous decline in y-o-y palm oil monthly production, the trend finally reversed last month, having registered a 1.4% y-o-y growth.
Should this trend persist, we could potentially see Malaysia recording a record monthly production this month (Sept), breaking its previous record of 1.61 million tonnes set in September 2006.
But, it remains to be seen if production will peak in September this year as some planters had earlier highlighted the potential for production peaking next month.
From Sept 1 to 10, export data was mixed. Interlek Testing Services (ITS) and cargo surveyor Societe Generale de Surveillance (SGS) drew different export outlooks for the period.
The discrepancies are huge – ITS estimated a 9.3% growth m-o-m in exports to 413,299 tonnes while SGS reported a contraction of 10.7% m-o-m to 334,800 tonnes over the same period. The export trend is, therefore, inconclusive at this juncture.
While the fundamentals of palm oil appear subdued in the near term, we believe developments in the soy oil market in the US and rapeseed oil in the EU should be monitored more closely this month .
Recommendation: These are the key drivers impacting local palm oil prices, and could prompt us to upgrade our Neutral call on the sector post the peak production period. In the meantime, we maintain our Neutral call on the sector and continue to prefer exposure to small-and-mid cap stocks like Asiatic Development Bhd, TH Plantation Bhd, Hap Seng Consolidated Bhd, CB Industrial Product Holding Bhd and Tradewinds Plantation Bhd for their relatively cheaper valuations
The rising inventory level was mainly due to a strong recovery in August production (+14.8% month-on-month; +1.4% year-on-year), while exports grew by 11.7% month-on-month albeit on a lower base.
On a year-on-year basis, exports shrank 5.5%. With the exception of China, which registered strong import figures (+36.7% month-on-month; +1.5% year-on-year), the other major importing countries from Malaysia like US, India and European Union suffered contractions.
Year-to-date (YTD) exports contracted by 8.2% y-o-y to 8.4 million tonnes as demand were affected by high palm oil prices.
Inventory expected to rise much faster as production is registering a spectacular recovery. Although YTD production is still down by 5.7% y-o-y, it has registered a significant pick up in the second half of this year (2H07), having narrowed from -8% as at June. After six months (since February 2007) of continuous decline in y-o-y palm oil monthly production, the trend finally reversed last month, having registered a 1.4% y-o-y growth.
Should this trend persist, we could potentially see Malaysia recording a record monthly production this month (Sept), breaking its previous record of 1.61 million tonnes set in September 2006.
But, it remains to be seen if production will peak in September this year as some planters had earlier highlighted the potential for production peaking next month.
From Sept 1 to 10, export data was mixed. Interlek Testing Services (ITS) and cargo surveyor Societe Generale de Surveillance (SGS) drew different export outlooks for the period.
The discrepancies are huge – ITS estimated a 9.3% growth m-o-m in exports to 413,299 tonnes while SGS reported a contraction of 10.7% m-o-m to 334,800 tonnes over the same period. The export trend is, therefore, inconclusive at this juncture.
While the fundamentals of palm oil appear subdued in the near term, we believe developments in the soy oil market in the US and rapeseed oil in the EU should be monitored more closely this month .
Recommendation: These are the key drivers impacting local palm oil prices, and could prompt us to upgrade our Neutral call on the sector post the peak production period. In the meantime, we maintain our Neutral call on the sector and continue to prefer exposure to small-and-mid cap stocks like Asiatic Development Bhd, TH Plantation Bhd, Hap Seng Consolidated Bhd, CB Industrial Product Holding Bhd and Tradewinds Plantation Bhd for their relatively cheaper valuations
source:Star Research
No comments:
Post a Comment