KUALA LUMPUR (May 13): Analysts expect the crude palm oil (CPO) stockpile to increase in the coming months, potentially exerting downward pressure on prices.

In their research notes on Monday, analysts from Maybank Investment Bank Bhd (Maybank IB), Hong Leong Investment Bank Bhd (HLIB) and Public Investment Bank Bhd forecast CPO inventories to continue rising, thus they maintained their ‘neutral’ call on the plantation sector.

Maybank IB said that the market anticipates the CPO stockpile to exceed two million tonnes.

It said the preliminary Malaysian export estimates for shipments from May 1-10, 2024 revealed weaker demand, as independent cargo surveyors such as Amspec and Intertek reported month-on-month (m-o-m) declines of -14.8%/-14.2% respectively, to 362,790 tonnes/369,920 tonnes respectively.

“The retracement in exports post-Ramadhan is within expectation based on past trends.

“From here on, we expect the stockpile to be rebuilt more meaningfully, especially during the peak production months of August to October,” it added.

Meanwhile, HLIB believes the stockpile will remain on an uptrend this month, as exports will likely remain subdued due to the absence of festive-driven demand and palm oil’s weak price competitiveness over competing oils.

“We maintain 2024-25 CPO price assumptions of RM4,000 per tonne and RM3,800 per tonne respectively,” it said.

Although Public Investment shares the same expectation with regard to the stockpiles, it expects palm oil players to see stronger earnings in the first quarter of 2024 (1Q2024).

“With the exception of Ta Ann Holdings Bhd (KL:TAANN) and TSH Resources Bhd (KL:TSH), the majority of the plantation companies under our coverage delivered better fresh fruit bunches production in 1Q2024, driven by higher productivity and improved fertiliser application in the past.

“On the CPO price performance, the CPO price average rose to RM4,006 per metric ton in 1Q2024 versus 4Q2023’s RM3,678 per metric ton,” it said.