Negligible impact from
lower palm oil and rubber prices
As of Feb 5, CPO settlement prices for April 2015 climbed to RM2,312 per tonne
With both crude palm oil (CPO) and
rubber prices trending near record lows, the impact on the economy could be
felt soon. Lower CPO and rubber prices could place some added headwind upon the
economy, which is already weakened by low crude oil prices.
Despite this, local economists downplay its impact, pointing out that palm oil and rubber exports represent only a small percentage of total exports. Market observers say the decline in commodity prices is not likely to have a lasting effect on the economy. Indonesia and Malaysia supply some 85% of the world’s palm oil.
According to AllianceDBS Research chief economist, Manokaran Mottain, palm oil and rubber exports’ impact is negligible.
“It [impact] is negligible compared to crude oil and other exports as palm oil and rubber represents only 6% of exports. Exports are still supported by liquefied natural gas [LNG] and electronics,” he tells FocusM.
Fears of oversupply and waning demand have driven CPO prices down by 33%. On Aug 29, CPO was hovering at RM1,929 per tonne, the lowest in four-and-a-half years. On March 11 last year, the CPO price reached RM2,917, its highest in recent years.
Despite a price rally in the first quarter of last year, CPO price fell victim to record soybean supply, which pushed soya oil prices lower. Low soya prices historically place some ceiling pressure on CPO prices. Waning demand from China also placed downward pressure on CPO prices where the Chinese market alone represents some 16% of demand for Malaysian palm oil.
Malaysia’s CPO exports from January to November last year totalled RM43.1 bil, marking a rise of 3.1% from 2013
Despite this, local economists downplay its impact, pointing out that palm oil and rubber exports represent only a small percentage of total exports. Market observers say the decline in commodity prices is not likely to have a lasting effect on the economy. Indonesia and Malaysia supply some 85% of the world’s palm oil.
According to AllianceDBS Research chief economist, Manokaran Mottain, palm oil and rubber exports’ impact is negligible.
“It [impact] is negligible compared to crude oil and other exports as palm oil and rubber represents only 6% of exports. Exports are still supported by liquefied natural gas [LNG] and electronics,” he tells FocusM.
Fears of oversupply and waning demand have driven CPO prices down by 33%. On Aug 29, CPO was hovering at RM1,929 per tonne, the lowest in four-and-a-half years. On March 11 last year, the CPO price reached RM2,917, its highest in recent years.
Despite a price rally in the first quarter of last year, CPO price fell victim to record soybean supply, which pushed soya oil prices lower. Low soya prices historically place some ceiling pressure on CPO prices. Waning demand from China also placed downward pressure on CPO prices where the Chinese market alone represents some 16% of demand for Malaysian palm oil.
Malaysia’s CPO exports from January to November last year totalled RM43.1 bil, marking a rise of 3.1% from 2013
Reference
No comments:
Post a Comment