By Samantha Tan

KUALA LUMPUR, Dec 24 (Bernama) — A fruitful year awaits Malaysia’s non-oil primary commodities especially for crude palm oil (CPO), rubber and tin boosted by intense demand despite the slower global economic environment forecast for 2008.

OSK Investment Bank plantation analyst Alvin Tai said that due to a strong demand environment and a shortfall in supply, it is likely to lead to a steep rise in CPO prices.

He said demand and prices are likely to go up, mainly because more rapeseed oil, soyoil and corn oil are being diverted into the bio-energy sector, as a result of which more palm oil is needed to offset the deficit in the food and other sectors.

“It is anticipated that next year the average price for CPO will be above the RM2,750 per tonne level as the current price uptrend will continue due to a supply shortage,” Tai told Bernama recently.

He said a lower palm oil production this year was mainly due to negative climate conditions and the poor output level which are unlikely to improve next year.

“We believe another tight supply stock situation could take shape next year, owing to a lower than expected Indonesian output,” he added.

Tai noted the robust demand from the food sector as well as biodiesel will put more pressure on the pricing of the golden crop.

The CPO market has been performing well since the beginning of 2007 as its rally was mainly due to the global crude oil price movement, which directly boosts demand for biodiesel as a replacement to petroleum products.

Tai believes that demand for CPO will be booming as more countries prefer it for biofuel due to the expensive oil prices and the continuous global effort to cut emissions.

He noted that industry players mostly will go for CPO because it is still at a discount compared to crude oil and vegetable oils as well as its proven benefits to health and also the environment.

Based on current price movements with CPO futures trading close to the RM3,000 per tonne level, analysts said that an estimate of RM2,750 for next year appears conservative.

Meanwhile, Bursa Malaysia Bhd chief executive officer Datuk Yusli Mohamed Yusoff said the plantation sector has grown tremendously based on the fundamentals.

“Production of palm oil is improving, demand is increasing. Palm oil-based companies continue to perform well and continue to attract investors,” he added.

Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui had said earlier that CPO prices will not fall from the level of above RM2,700 per tonne at least until next year due to lower output and higher demand.

Chin also pointed that the demand for palm oil will continue to increase as soya bean producers switch to corn to capitalise on bio-ethanol production.

As for rubber, next year is expected to be another positive year based on the current momentum as the market has also benefited from the escalating oil prices, a dealer said.

“The expensive oil also helped the rubber prices as it prompted industry players to shift to natural rubber from synthetic rubber which is made from petrochemicals,” he noted.

A dealer said the International Rubber Conference, the most respected event for the world rubber industry, which will be held next year, is likely to further attract global players and open up more opportunities in the industry.

“Demand from overseas mainly China and India is likely to increase next year, especially from the automotive industry. As the industry is growing, industry players need more rubber for their production,” the dealer said.

He said demand for next year from other countries such as South Africa, Pakistan, Europe and Australia is likely to improve.

Another factor that will determine the trend of rubber is weather, which is likely to affect tapping activities in producing countries such as Thailand and Malaysia.

“The prices will stay high and will even go higher if projected output is cut by unfavourable weather,” the dealer said.

This year saw both SMR 20 grade (Standard Malaysia Rubber) and latex in bulk touching as high as 804.50 sen per kg and 542.50 sen per kg respectively. Commenting on tin, another dealer said persistent demand will keep the price high, which is likely to see the price on the Kuala Lumpur Tin Market (KLTM) at above the US$16,000 per tonne level.

“Buying will be mainly by Japanese traders while local and European traders will continue to be supporters of the commodity,” he said. The tin price on the KLTM, which stood at US$11,570 per tonne early this year, has gone above the US$16,000 per tonne level.

– BERNAMA

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