KUALA LUMPUR: Crude palm oil (CPO) price will likely sustain at above RM4,000 per tonne over the next few months, possibly until the first quarter (Q1) of 2023, Hong Leong Investment Bank Bhd (HLIB) said.
The firm said this would be supported by near-term supply concerns and palm's price competitiveness.
Besides that, HLIB said the elevated CPO price would also be driven by CPO's wide discount against soybean oil, which encouraged palm oil consumption, Indonesia's plan to raise its biofuel mandate (from B30 currently to B35) by 2023, easing concerns on Malaysia and Indonesia's palm oil stockpiles and easing Covid restriction in China.
"We believe CPO price will start trending down from Q2 2023, on the back of better supply visibility for vegetable oils (arising from easing labour shortage in Malaysia and absence of weather anomalies), heightened risk of global recession and inventories build up in key palm oil importing countries," it said in a note today.
HLIB said while the number of foreign workers arrival (98,000) still dwarfs in comparison to labour shortfall of 1.3 million for the country, the arrival of foreign workers had started gaining traction in the past few months.
"This should continue to improve into 2023, as Indonesia has lifted its freeze, while Bangladesh has agreed to send 500,000 workers over the next three years," it added.
HLIB maintained its 2023-2024 CPO price assumptions of RM4,000 per tonne and RM3,800 per tonne.
The firm also maintained its "Neutral" call on the sector, with top picks including IOI Corp Bhd and Kuala Lumpur Kepong Bhd.