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. 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
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
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
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. 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. 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. 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. 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. 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. 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
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. 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. 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
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
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
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. 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. 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
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
