RHB IB neutral on plantation sector as Indonesia to lift palm oil ban

Indonesia is set to lift its palm oil export ban effective May 23, 2022. — Picture by Shafwan Zaidon

Indonesia is set to lift its palm oil export ban effective May 23, 2022. — Picture by Shafwan Zaidon

Friday, 20 May 2022 1:56 PM MYT

KUALA LUMPUR, May 20 ― RHB Investment Bank Bhd (RHB IB) has maintained a “neutral” stance on the plantation sector following Indonesia’s announcement to lift its palm oil export ban effective May 23, 2022.

In a note today, the research firm said there could be more policy changes to come from Indonesia, as bulk cooking oil prices have still not come down to the desired level.

“While crude palm oil (CPO) prices could come off as a result of this news, the share price of planters with Indonesian operations may rise,” it said.

The ban, which was imposed on April 28, 2022, was introduced to increase local palm oil supplies in order to bring down domestic cooking oil prices.

Despite the price of bulk cooking oil not yet reaching the intended IDR14,000 per litre target, the lifting of the ban was decided considering the welfare of 17 million workers in the industry.

RHB IB said to mitigate the ban, players have been reducing purchases of third-party fresh fruit bunches (FFB) as well as holding off on selling their CPO given their capacity to store one to three months of inventory.

“Around one month of exports should return to the market with this move or close to 2.4 million tonnes of supply,” it said.

Meanwhile, Public Investment Bank Bhd said the announcement was a huge relief for the global vegetable oil buyers after the war in Ukraine, which resulted in shortages of sunflower oil supply.

“The lifting of the palm oil export ban should help to ease the pressure on global vegetable oil supply.

“At the point of writing, CPO futures slipped RM60 per tonne to RM6,010 per tonne while soybean oil fell as much as 1.6 per cent,” it said. ― Bernama