FITCH Ratings expects crude palm oil (CPO) prices to decline in 2021 on higher supply with assumption of an average US$560/tonne (about RM2,270/tonne) over the year despite some upside risk such as a strong La Nina weather pattern.
There are indications that supply and inventory are picking up in Indonesia which is the world’s largest CPO producer, according to the credit rating agency.
Moreover, the high prices are affecting demand from key constituents such as Indian imports and Indonesian biodiesel.
“Malaysian benchmark CPO spot prices touched US$900/tonne (RM3,646/tonne) in December 2020 for the first time since 2012 and averaged at around US$810/tonne (RM3,281/tonne) in 4Q 2020 to date,” Fitch pointed out in its Asian CPO Watch 4Q 2020.
“This was significantly higher than the US$660/tonne (RM2,673/tonne) average in 3Q 2020.”
Prices in 2H 2020 were supported by weak output and low inventory in Malaysia, robust prices and outlook for soybean oil – a close substitute for palm oil – due to market expectations of dry weather affecting supply, and a recent hike in Indonesian palm oil export levies, added the credit rating agency. – Dec 29, 2020
