KUALA LUMPUR, Jan 14 (Bernama) -- CGS International Securities Malaysia Sdn Bhd has maintained its crude palm oil (CPO) price forecast for 2025, premised on higher year-on-year (y-o-y) CPO production and demand rationing.
In a note, the research firm said the global CPO production is expected to increase by 3.0 per cent y-o-y this year, rebounding from the slight 1.0 per cent y-o-y contraction in 2024, primarily driven by Indonesia, which experienced a sharp decline in output in 2024 due to the impact of El Nino.
“With climatic conditions stabilising, we anticipate a significant recovery in Indonesian production in 2025,” it said.
In contrast, CGS International forecasts Malaysia’s palm oil production to remain largely flat y-o-y in 2025, following a strong recovery in 2024.
According to the Malaysia Palm Oil Board, Malaysia's palm oil production grew by 4.0 per cent y-o-y in 2024, while exports surged 12 per cent y-o-y, thanks to lower production in Indonesia, resulting in Malaysia's palm oil inventory dropping to a low of 1.7 million tonnes by the end of 2024.
Given the current high CPO prices, at around RM4,200 - RM4,700 per tonne, CGS International expects demand rationing by some of the destination countries, such as China and India.
“Note that palm oil is currently still more expensive than soybean oil and sunflower oil. We expect global CPO demand to grow 1.0 per cent y-o-y in 2025, with the demand mainly coming from Indonesia to support its B40 biodiesel programme,” it added.
On supply, the research firm reckons the global palm oil supply would remain tight in the first quarter of 2025 (1Q 2025), given the low inventory level as of end-2024, noting that 1Q is usually the lowest quarter for palm oil production.
Hence, it expects CPO prices to remain elevated in 1Q 2025 until a recovery in palm oil output is seen in 2Q 2025, particularly in Indonesia, after disruptions caused by El Niño in 2023.
“Additionally, we expect a higher supply of competing vegetable oils, such as soybean oil in 2Q 2025,” it said.
Commenting on Indonesia's B40 biodiesel programme implementation, CGS International anticipates that the higher palm oil blending ratio in Indonesia’s biodiesel will continue to support robust global palm oil demand.
The Indonesian Ministry of Energy and Mineral Resources expects the implementation of the B40 biodiesel policy in Indonesia to raise its biodiesel quota to 15.6 million kiloliters (kl) in 2025, up 16 per cent from 13.4 million kl in 2024.
Despite earlier plans for full implementation by Jan 1, 2025, the B40 programme has been delayed, with companies receiving a one to two-month transition period to meet the new biodiesel blending requirements.
In addition, it anticipates most Malaysian plantation companies to deliver strong 4Q 2024 results, supported by elevated CPO prices, with the average price in 4Q 2024 at RM4,840 per tonne (3Q 2024: RM3,989 per tonne; 4Q 2023: RM3,666 per tonne).
“Despite expecting robust performance and continued high CPO prices in 1Q 2025, we maintain our neutral call on the sector, as we see potential CPO correction in 2Q 2025, driven by recovering palm oil production (especially from Indonesia) and higher supply from competing vegetable oils,” it added.
-- BERNAMA
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