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Mr. sandeep bhan palmoil

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Mr. sandeep bhan palmoil

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Mr. sandeep bhan palmoil

  1. 1. 1 Palm Oil Scenario Globoil New Delhi, India 6th February 2019 Sandeep Bhan
  2. 2. Reflection 2018 Performance Snapshot for the industry in 2018 ❑ Price and Spreads ❑ Production outlook ❑ Demand growth ❑ End stock 2 Refining Industry Sustainability Projections for 2019 3 1 4 5
  3. 3. Reflection for 2018… (1/5) T h e y e a r w a s f i l l e d w i t h c h a l l e n g e s fo r t h e o i l p a l m i n d u s t r y Price landscape : Futures price (3rd month) fell 15% YoY to average at RM 2,300 (2018) vs RM 2,700 (2017) ROBUST global supply of PALM OIL in 2018 (72 Mln MT vs 68 Mln MT in 2017) , growth mainly in Indonesia DECLINE world imports of PALM OIL led to RECORD stocks (Combined Malindo ~7 Mln MT in 2018) HIGH stocks led to shortages in storage and barges (esp. in Indonesia) Surplus availability of other vegetable oils (particularly soy and copra) Ongoing negative campaigns towards palm oil further pressure the oil palm industry Good refinery margin in Indonesia POGO spread touched $200 level, which gave firm support to BMD (Oct’18) 1 2 3 4 5 8 1,000 3,000 5,000 7,000 9,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Inventory level remains elevated in Malindo --ending 2018 with a 7 Mln MT mark 2016 2017 2018 However, mandated biodiesel policy provided some cushion to palm prices in 2018 6 7 Bear market in 2018 – Futures price fell below the physiological level of RM 2,000
  4. 4. 4 Cont… (2/5) 2018 2017 YoY % BMD 3rd month (RM) 2,301 2,703 -15% CPO physical (RM) 2,261 2,815 -20% CPKO (RM) 3,690 5,388 -32% PK (Peninsular M'sia) (RM) 1,785 2,531 -29% RBD Palm olein (FOB) (USD) 586 689 -15% Stearin (USD) 582 668 -13% Indonesia (FOB Belawan/ Dumai) (USD) 566 687 -18% CPO (Ciff Rotterdam) (USD) 596 720 -17% CNO ( Phil/Ind) (USD) 997 1,651 -40% S n a p s h o t : P r i c e P e r fo r m a n c e a n d S p r e a d s Palm oil and Lauric oil Performance Gen erally, 2 0 1 8 h as b een an oth er roller coaster year for palm oil industr y
  5. 5. 5 Soy to palm High: USD 146/MT (Dec’18) Low: USD 54/MT (Feb’18) Avg: USD 93/MT Cont…. (3/5) Soyoil vs Palm oil Chart : Bloomberg Soy to palm premium was high during 3Q of 2018 – palm will likely fin d market s h are es p ecially in p rice s en s itive markets
  6. 6. 6 Cont…. (4/5) POGO High: USD 92/MT (Feb’18) Low: -USD 211/MT (Oct’18) Avg: -USD 63/MT Palm oil vs Gas oil Chart : Bloomberg POGO s p read h as n arrowed toward s en d of th e year d u e to fallin g B rent oil p rices
  7. 7. Cont… (5/5) 7 Daily PALK-MYID-P3, CNUT-PHID-P3 11/29/2017 - 1/16/2019 (GMT) Line, PALK-MYID-P3, Last Quote(Last) 1/16/2019, 810.00, N/A, N/A Line, CNUT-PHID-P3, Last Quote(Last) 1/16/2019, 807.50, N/A, N/A Price USD T Auto 700 750 800 850 900 950 1,000 1,050 1,100 1,150 1,200 1,250 1,300 1,350 1,400 1,450 810.00 807.50 04 11 18 27 08 15 22 29 05 12 19 26 05 12 19 26 02 09 16 23 07 14 21 28 04 11 18 25 02 09 16 23 30 06 13 20 27 03 10 17 24 01 08 15 22 29 05 12 19 26 03 10 17 24 31 07 14 Dec 17 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Jan 19 CCNO vs CPKO, Cif Rotterdam Prices of CPKO and CNO ( Cif Rotterdam) fell almost u n interru pted ly in 2 0 1 8 Chart : Bloomberg High: USD 180/MT (Jan’18) Low: -USD 15/MT (Aug’18) Avg: USD 72/MT CCNO vs CPKO
  8. 8. 2018 : Malaysia Production 8 24% 7% 8% 1% -8% -12% -18% -10% 4% -2% -5% -1% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% - 5,00,000 10,00,000 15,00,000 20,00,000 25,00,000 January – December 2017 2018 YoY % National production declined marginally by 2% YoY (19.5 Mln MT) in 2018 compared to 19.9 Mln MT in 2017 L O W E S T : 1 . 3 3 M L N M T ( J U N E ) , - 1 2 % Yo Y H I G H E S T : 1 . 9 7 M L N M T ( O C T O B E R ) , - 2 % Yo Y Lower CPO production mainly due to : a) Limited replanting activities b) Lower FFB yield for the year c) Lower FFB processed Most of the decline seen in the Peninsular Malaysia (-4% YoY) • Sabah (-2% YoY) • Sarawak (+1% YoY)
  9. 9. 2018 : Indonesia Production 9 19% 27% 25% 21% 27% 19% 14% 3% 9% 9% 0% 9% -5% 0% 5% 10% 15% 20% 25% 30% - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 January – December 2017 2018 Source : GAPKI (est) L O W E S T : 3 . 3 5 M L N M T ( F E B R U A R Y ) H I G H E S T : 4 . 5 1 M L N M T ( O C T O B E R ) Higher production in 2018 a) Yield recovery from 2015/1 drought b) Conducive weather pattern Indonesia’s Palm Oil production for 2018 expected at 42 Mln MT in 2018 (up 13% YoY)
  10. 10. 2018 : Export Trend (MALINDO) 10 Dec-18 Nov-18 MoM % 2018 2017 YoY % China 268,989 172,886 56% 1,859,748 1,917,288 -3% India 284,178 242,279 17% 2,514,008 2,028,297 24% EU 93,299 148,801 -37% 1,911,797 1,991,548 -4% Pakistan 104,293 84,621 23% 1,161,260 1,016,977 14% US 58,329 35,638 64% 540,509 554,614 -3% Others 574,219 691,181 -17% 8,499,380 9,051,233 -6% Total 1,383,307 1,375,406 1% 16,486,702 16,559,957 -0.4% 000 MT Nov-18 Oct-18 MoM % YTD Nov'18 YTD Nov'17 YoY % China 432 542 -20% 3,921 3,368 16% India 711 689 3% 6,159 7,032 -12% EU 321 407 -21% 4,363 4,588 -5% Pakistan 326 247 32% 2,194 2,008 9% US 120 133 -10% 1,109 1,066 4% Others 1,083 1,121 -3% 11,332 10,364 9% Total 2,993 3,139 -5% 29,079 28,427 2% MALAYSIA INDONESIA India took the leadership position by being the top buyer for Malaysian/Indonesian oils Deman d d id n ot keep p ace with s u p p ly in 2 0 1 8
  11. 11. 2018 : End Stock (MALINDO) 11 +18% +64% Com b in ed MAL I NDO p alm oil inventor y in 2 0 1 8 ~ 7 Mln M T Malaysian national inventory grew by 18% YoY to 3.2 Mln MT as at end Dec 2018 mainly due to: • High carry over stock from 2017 • Significantly more imports • Subdued demand Indonesia’s palm oil stock were at 3.5 Mln MT (as at Nov’18) , having peaked to 4.5 Mln MT in July 2018 • December’s stock level likely to decline further (~3.3 – 3.4 Mln MT) supported by higher mandatory biodiesel usage & seasonal decline in production 2012 2015 2017 2018 2019 Malaysia December November October December ? Indonesia October November November October Peak stock month Source : LMC
  12. 12. 2018 : Malaysia Downstream Sectors 12 Palm Oil Refineries Oleo chemical Plants Biodiesel Plants No in Operation Processing Capacity (Mln MT / year) Utilisation Rate (%) 50 26.24 66.7 19 2.67 99.0 15 2.00 64.2 As at Dec 2018, source : MPOB REF I NI NG I NDUST RY 1 Series of hike in Indian import duty has caused slowdown in Indian imports 2 Diminishing refining margins after removal of Indonesian levy and Malaysia’s export tax during end of the year 3 Indonesia tax structure was at $0/MT, Malaysian oils became less competitive
  13. 13. 13 2018 : Indonesia Downstream Sectors REFI NI NG I NDUSTRY Good refining margin throughout the year due to lower local CPO price Export tax was at USD 0/MT during the year & abolishment of levy (Dec’18) further boosted demand Strict implementation of B20 mandate helped to lift demand for refined products No of operation Capacity (Mln MT/ year) 21 10.11Biodiesel Plants
  14. 14. Sustainability 14 S a l e s o f s u s t a i n a b l e p a l m o i l o n l y a f ra c t i o n o f g l o b a l d e m a n d C S P O S u p p l y s h o w s a n u p w a r d t r e n d , h o w e v e r t o t a l C S P O s a l e s i s f l a t • Insufficient take up of CSPO products despite producers working hard to meet international requirement for sustainable practices and certification • About 20% of global palm oil production is now certified sustainable. • Yet less than half is sold as CSPO with minimum or negligible market premiums attached • Many FMCG’s that are investing in RSPO certified palm oil but fail to promote this practice, due to persistent negativity surrounding palm oil 3 1 2
  15. 15. Traceable Products to India 15 MB RBD Olein MB RBD Stearin MB PFAD a. Mass Balance (MB) oils Traceability up to mills are becoming a norm for trades India has started taking traceable products SG CPOb. Segregated (SG) oils
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  17. 17. What’s in store for 2019 17 PRICE Palm oil price are set to increase this year on the back of slowing output (esp. Indonesia) and robust demand for the commodity Very strong since mid 2017 and production may take a breather this yearOUTPUT BIODIESEL Slightly higher than 2018 and likely to peak somewhere between October - November Global palm oil production pegged at 74 Mln MT , marginal increase from 72 Mln MT in 2018 ~ 9 0 % o f g l o b a l o u t p u t Indonesian and Malaysian governments pushing the use of biofuels STOCKS Peak stocks would not mirror 2018’s high
  18. 18. 18 Projection for 2019 CPO output estimated to be at 19.5 Mln MT in 2019 Malaysia's palm oil production expected to be unchanged this year CPO Prod u ction (MAL AYSI A & I NDONESI A) CPO output estimated to be at 1 - 2 Mln MT higher than 2018 (44 – 45 Mln MT) Indonesia's 2019 production is expected to grow mainly due to better crop yields from successful replanting execution
  19. 19. 19 Projection for 2019 Average Market Price Consensus for 2019 : RM 2,320 2180 2230 2280 2330 2380 2430 Public Invest MIDF HLIB POA Philip Futures Maybank TA Securities Kenanga CIMB Average Price Consensus from Major Research House Source : Individual price published by research house RM 2,320
  20. 20. Other factors affecting price : BULL 20 Weather: Potential El Nino? Usage of Mandated Biodiesel (Malindo) – No Backtracking Any further potential for duty deduction on Palm Firmer crude mineral oil prices - supportive for discretionary demand of Biodiesel Brighter economic outlook
  21. 21. Other factors affecting price : BEAR 21 Surplus in soy availability – narrowing soy to palm premium Competition from other crops Strengthening of the Ringgit Uncertainties over US – China trade war (resumption or end of trade war) Unfriendly policies imposed
  22. 22. 22 Source : Malaysian Palm Oil Council “Love MY Palm Oil” Campaign S p e c i a l M e s s a g e b y t h e H o n o ra b l e M a l ay s i a n P r i m e M i n i s t e r • To raise awareness on Palm Oil. • Aims to instill national pride and greater appreciation for palm oil focusing on socio economic, health nutrition, food and non food application
  23. 23. THANK YOU..

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