CIMB: India's duty cut, low stocks seen boosting Malaysian palm oil exports
KUALA LUMPUR: India's recent decision to reduce import duties for palm oil, coupled with low edible oil stocks in the country, is likely to boost Malaysian palm oil exports in May.
CIMB Securities Research said the recent correction in the crude palm oil (CPO) price has improved palm price competitiveness against soybean oil.
"Palm oil currently trades at a discount of US$128 per tonne against soybean oil.
"This, coupled with India's recent decision to halve the import duties on palm oil to 10 per cent with effect from 30 May, will lower the effective duty on palm oil to 16.5 per cent," it said in a note.
The firm said this competitive pricing, combined with current low domestic stocks in India, is expected to lead to increased Indian palm oil purchases.
Separately, CIMB Securities said the Indonesian government raised the export levy on crude palm oil to 10 per cent, effective from May 17, to raise revenue to fund its biodiesel programme and subsidise replanting.
"Following the change, we expect Indonesian palm oil exports to resume in favour of refined palm products.
"We project CPO prices to remain within the RM3,700–4,100 per tonne range in June, given rising exports.
"Our average CPO price forecast of RM4,200 per tonne for 2025 remains unchanged," it said.
Meanwhile, CIMB Securities said Malaysian palm oil stocks are expected to rise one per cent month on month (MoM) to 2 million tonnes in June 2025.
The firm said Malaysian palm oil stocks rose seven per cent MoM to 1.99 million tonnes in May 2025, below its estimates but in line with consensus estimates.
"The CPO production is projected to be flat owing to fewer working days, while palm oil exports are expected to increase by eight per cent MoM to 1.5 million tonnes," it said.
Overall, CIMB Securities has maintained its Neutral rating on the sector, as it expects CPO prices to remain range-bound.
"Our preferred pick is IOI Corp Bhd given its lower exposure to Indonesian regulatory risks, its relatively attractive valuations and the positive impact of a stronger ringgit on its US dollar debt obligations.
"For investors seeking dividend yield and exposure to smaller-cap palm oil players, our preferred pick is Hap Seng Plantations Bhd owing to its undervalued assets," it added.
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