InfoSAWIT, KUALA LUMPUR - The price of crude palm oil (CPO) is expected to remain high in the first half of 2025 (1H 2025), ranging from RM4,400 to RM4,800 per ton. However, prices are predicted to moderate in the second half of 2025 (2H 2025) to RM4,000 to RM4,400 per ton as production peaks.
According to RHB Investment Bank Bhd (RHB IB), this projection is supported by several factors, including low production and stocks in Indonesia in 2024, an increase in the biodiesel mandate in Indonesia for 2025, and tighter supplies of sunflower and rapeseed oil next year.
"These factors will lead to a more pronounced global oil and fat deficit in 2025, pushing vegetable oil prices higher, with the stock-to-use ratio for 17 types of oils and fats reaching a 15-year low of 12.6%," RHB IB stated in its report, as quoted by InfoSAWIT from Bernama on Wednesday (January 14, 2025).
However, several downside risks have also been identified, including geopolitical tensions, significant changes in crude oil prices, weather anomalies, worsening labor conditions in Malaysia, and potential revisions to tax and trade policies in Indonesia.
RHB IB maintains an "overweight" recommendation for the plantation sector, expecting that higher and stable CPO prices in 2025 will enhance the sector's performance. Kenanga Investment Bank Bhd (Kenanga IB) and CIMB Securities Sdn Bhd also provided similar recommendations, with Kenanga IB noting that tight vegetable oil supplies will keep CPO prices high.
"The FAO vegetable oil price index rose 33% year-on-year in 2024, despite a slight month-on-month decline," Kenanga IB stated. Among the four main vegetable oils—palm oil, soybean, rapeseed, and sunflower—palm oil remains the price leader.
CIMB Securities projects that palm oil stocks will rise by 1.0% month-on-month (m-o-m) to 1.73 million tons in January 2025, driven by weak exports and domestic consumption. However, CPO production is expected to decline by 8.0% m-o-m to 1.37 million tons due to seasonal factors, while palm oil exports are predicted to drop by 16% m-o-m to 1.13 million tons. The significant price difference between CPO and soybean and rapeseed oil is prompting consumers to switch to cheaper alternatives.
On the other hand, the planned adoption of B40 biodiesel in Indonesia by the end of the first quarter of 2025 is expected to boost domestic demand for palm oil. Considering these various factors, CIMB Securities maintains an average CPO price projection of RM4,200 per ton for 2025. (T2)