MIDF Research said it anticipates the average CPO price to stabilise at RM4,815 per tonne.
PETALING JAYA: Crude palm oil (CPO) prices are expected to remain firm or move higher in 2025 versus a price average of about RM4,200 per tonne in 2024, say industry experts.
At the recent Malaysian Palm Oil Economic Review and Outlook (R&O) Seminar 2025, the host Malaysian Palm Oil Board (MPOB) had forecast CPO prices to average at RM4,000 to RM4,300 per tonne, while the guest speakers have pegged prices averaging RM4,250 to RM4,350 per tonne for this year.
This optimism is supported by ongoing biodiesel mandates that are expected to keep palm oil inventories tight on the back of subdued CPO production growth in Malaysia.
On the other hand, caution was expressed with regards to palm oil’s widened price premiums versus other vegetable oils and petroleum fuel, while current price gaps may be due for a correction, and supply scarcity may continue to propel palm oil as the price leader.
Following the MPOB’s R&O seminar, UOB Kay Hian (UOBKH) Research in a report said: “We maintain our existing 2025 CPO price assumption of RM4,500 per tonne, which is higher than the MPOB event speakers’ price expectations.”
The brokerage also noted its “market weight” call on the plantation sector is also maintained, premised on an expected moderation in CPO prices from the second quarter of financial year 2025 (2Q25) onwards, as the market balances untightened.
“That said, we see a potential short-term trading window in 1Q25 for companies with strong leverage to CPO prices, should Indonesia proceed with the full implementation of its upgraded B40 biodiesel mandate under its revised timeline by mid-February,” added UOBKH Research.
However, the risks to the sector include a slower-than-expected recovery in palm oil production in both Malaysia and Indonesia that may keep CPO prices higher for longer, which would, in turn, serve as a positive catalyst for share prices in the sector.
On the other hand, a longer-than-expected delay in the implementation of Indonesia’s B40 biodiesel mandate could exert further downward pressure on CPO prices, said the brokerage.
In terms of production, UOBKH Research said both MPOB and guest speakers at the seminar expect Malaysia’s production to rise only marginally in 2025.
Some of the potential challenges cited by speakers include weather disruptions, continued consolidation of planted areas, as well as ageing palm trees amid insufficient replanting activities.
Positive production growth drivers seen for the year include an anticipated recovery in oil extraction rates after posting a year-on-year decline in 2023 due to unfavourable weather conditions and unripe fruit bunches.
In addition, the MPOB sees more room for improvement in labour productivity as the labour shortage situation continues to ease up, while newly-hired foreign workers should continue to acclimatise to plantation estate work.
UOBKH Research also said MPOB expects more headroom for Malaysia to gain export market share over Indonesia given the latter’s increased domestic feedstock requirements to fulfil its new biodiesel blending mandate.
Meanwhile, guest speaker forecasts are less bullish on exports, instead anticipating a slight year-on-year decline in 2025, influenced by buyers’ aversion to elevated palm oil prices plus widened premiums versus other competing oils.
Jumping into January 2025, MIDF Research in a note to clients said it anticipates the average CPO price to stabilise at RM4,815 per tonne or down 6% month-on-month.
This is due to the expected slower recovery in the local output amid low stock level on top of delayed B40 rate in Indonesia,
“We maintain a tactical positive outlook on the sector, but we foresee only a handful of players likely to benefit from elevated CPO prices,” it added.
