RHB Research has maintained a “Neutral Call” on the plantation sector adding that Indonesia has clarified that the export ban only affects refined, bleached, and deodorised (RBD) palm olein.
Consequently, we think the recent sell-down of several upstream Indonesian and Singaporean listed planters may be overdone since CPO exports are allowed again.
It said that downstream Indonesian planters may look for ways to circumvent this ban by exporting more CPO and RBD palm oil, or even exporting to Malaysia to be refined and re-exported.
Following Indonesia’s ban on exports of PO effective 28 Apr, the Government has clarified that the export ban is only for RBD palm olein and not for CPO or other derivatives. In 2021, the export volume of RBD palm olein was 12.7m tonnes, and in Jan-Mar 2022, it was 1.5m tonnes.
RHB said that based on the latest development, upstream planters will be able to go back to either selling CPO domestically to refiners or exporting it; downstream planters can either not refine their products and just export CPO, or only produce RBD palm oil which is still allowed to be exported; downstream planters that do not change their product mix could be at a disadvantage as there will be a surplus of RBD palm olein in the domestic market – should they sell the olein to bulk cooking oil producers, they will be able to recover the price difference from the biodiesel fund.
However, if they sell the olein to the branded cooking oil market, prices may be negatively affected by the excess supply to the market; Indonesian planters that have downstream capacities in Malaysia may also decide to export CPO to Malaysia to be refined there instead.
It said that Malaysian downstream planters would also stand to benefit – less competition from the previously lower priced refined products in Indonesia; potentially more CPO supply from Indonesia will likely result in higher utilisation rates for their refineries
