Tuesday, February 5, 2013

Market Intelligence Crude Palm Oil 5th February, 2013

Market Intelligence

Crude Palm Oil inched lower globally on concerns of uncertainty in Europe which stirred in negative sentiments. Political instability in Spain and Italy prompted investors to lock in gains. Downfall was, however, limited on fears of unpleasant weather in major Soybean growing regions in Argentina and expectations for improving Palm Oil exports.

Palm Oil exports are likely to improve in coming months, driven mainly by Malaysia's move to revamp its existing export duty structure as part of a plan to improve competitiveness and grab back market share from top producer Indonesia. Malaysia's export tax changes will aid refiners in the country as margins will improve. There are also forecasts of higher shipments to emerging markets such as Myanmar and Iran as consumption rises there.

Malaysia expects brighter days for Palm refiners on account of better margins as they ramp up production. Indonesia's move of higher export taxes will act as a blessing for refiners in Malaysia. More exports will bring down the stockpiles which will ultimately raise the price of CPO. Exports may go up this year as the Malaysian government has already discontinued the duty free export quota beginning last month. The use of B10 bio diesel containing CPO from middle of next year is also expected to stabilize the prices.

Palm Oil may trade volatile with range bound movement as traders may move to the sidelines ahead of the Lunar New Year holidays. The China markets are expected to slow down next week ahead of the Chinese New Year which falls on February 10, 2013. Investors also remain cautious over demand for Malaysian exports, even though Chinese authorities haven't refused shipments after imposing stricter quality control measures. Stockpiles in January are also close to December's record high.

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