PALM oil stock level fell for the fifth consecutive month, by -4.3% month-on-month (MoM) to 1.51 mil tonnes in Feb-25, as weaker exports were more than offset by lower imports and output, as well as higher domestic consumption.
“The stockpile came in higher than Bloomberg median estimate, due mainly to better-than-expected output and lower-than-expected exports,” said Hong Leong Investment Bank (HLIB) in a recent report.
Palm oil production remained on downtrend, falling by -4.2% MoM to 1.19 mil tonnes in Feb-25, as seasonally low cropping pattern was exacerbated by excessive rain.
“Exports fell further, by -16.3% MoM to 1.0 mil tonnes in Feb-25, due to demand rationing, palm’s weak price competitiveness against other competing oils, and seasonality, in our opinion,” said HLIB.
Cargo surveyor Intertek Services indicated that palm oil shipment from Malaysia fell -12.0% MoM to 141k tonnes during the first 5 days of Mar-25, dragged mainly by lower shipments to Africa, India and Middle East.
The downtrend in palm oil stock level will likely persist into Mar-25, mainly on the back of less favourable weather conditions, which will likely suppress palm production further.
Demand rationing, on the other hand, will likely persist into Mar-25, and this will cap restocking activities ahead of Ramadhan month. YTD, CPO price averaged at RM4,709 per mt.
“We maintain the view that crude palm oil (CPO) price will remain at elevated level in the near term, and CPO price strength to dissipate post quarter one 2025 (1Q25).
Hence, HLIB is keeping their 2025-26 CPO price assumptions of RM4,000 per mt and RM3,800 per mt unchanged.
“We maintain our NEUTRAL stance on the sector, as the elevated CPO price will unlikely sustain beyond 1Q25,” said HLIB.
For exposure, HLIB’s top picks are now JPG (BUY; TP: RM1.35), Hap Seng Plantations (BUY; TP: RM2.44) and IOI (BUY; TP: RM4.24). —Mar 11, 2025
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