Malaysia’s June-end palm oil inventories rise as shipments slow

MALAYSIA: Malaysia’s palm oil stocks hit a seven-month high at the end of June, as exports were curtailed by Indonesian measures aimed at boosting its own shipments, according to statistics released by the industry regulator on Tuesday.

According to the Malaysian Palm Oil Board, inventories jumped 8.76 percent from the previous month to 1.66 million tonnes, the highest since November (MPOB).

At a seven-month high of 1.55 million tonnes, crude palm oil production increased by 5.76 per cent in May.

Traders in Kuala Lumpur said that the production increase was smaller than expected, highlighting the ongoing supply disruptions at most plantations because of labor shortages.

Despite a temporary export ban lifted by Indonesia in May, exports fell by 13.26% to 1.19 million tonnes as the country implemented a new set of regulations designed to promote exports.

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Biodiesel produced in Indonesia will contain 35 percent palm oil-based fuel, known as B35, starting on July 20, the country announced last week.

One of its possible policy options is to reduce the export charge in an effort to increase exports and decrease stockpiles.

Local palm oil consumption will rise, stocks will be reduced, and domestic price sentiment will improve, according to CGS-CIMB Research regional head of plantations research Ivy Ng in a note.

This policy will take time to lower inventories, she said. The extra absorption rate of crude palm oil is estimated at 134,000 tonnes a month.