High Reserves and Ringgit Appreciation Has Potential to Press Price of CPO Malaysia

By : Abraham Sihombing And Aldo Bella Putra | Friday, January 05 2018 - 20:00 IWST

Kebun Kelapa Sawit (Ist)
Kebun Kelapa Sawit (Ist)

INDUSTRY.co.id - Jakarta - Crude Palm Oil (CPO) price of Malaysia is expected to be depressed again in trading on Friday (05/01/2018) due to high Malaysian CPO reserves and the strengthening of Malaysian Ringgit (RM) exchange rate.

Malaysian CPO price on Friday trading (05/01/2018) is expected to move in the range of RM2.475-2600 per ton. Nevertheless, the price of vegetable oil derived from palm oil tends to weaken due to anxiety that appears in the market.

According to data from CIMB Equities Research, Malaysia's CPO reserves are projected to rise 6% to 2.7 million tons in December 2017 compared to 2.56 million tons in the previous month.

"The prediction raises market players' anxiety about the price which has the potential to decline due to excess supply in the market," said Faisyal, commodity stock analyst at PT Monex Investindo Futures, in Jakarta, Friday (05/01/2018).

Meanwhile, CIMB Futures said CPO production could potentially decline by 5% in December 2017 compared to the previous month, but exports are likely to rise 8% during the period due to high demand from India and the European Union.

At 11:05 GMT, the RM exchange rate rose 0.2% to 3.9960 positions per US dollar. RM strengthening is very worrying market participants because the RM appreciation will make the price of CPO to be expensive for the owners of other currencies.

According to Faisyal, Malaysian CPO price will drop if it touches RM2.525 per ton. The decline is expected to continue to occur until reaching RM2.475 per ton.

"Similarly, if the level reaches RM2.570 per ton, then the price of palm commodity can continue to slide up to the level of RM2.600 per ton," added Faisyal. (Abraham Sihombing)

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