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Analysis: Recovery of CPO demand
One of the indicators that show improved demand is export volume from major producing countries, such as Indonesia and Malaysia. Indonesia's CPO export volume in June and July 2020 were 2.1 and 2.4 million tons respectively, the same volume as Indonesia’s CPO exports in June and July 2019.
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Workers harvest oil palm fruit at PT Kimia Tirta Utama’s oil palm plantation in Siak regency, Riau, in this photo file. (Antara/FB Anggoro)
T
he COVID-19 pandemic has hit global demand for most products, including crude palm oil (CPO). The United States Department of Agriculture (USDA) in its oilseed report predicts that global consumption of CPO will decline by 2.3 percent year-on-year (yoy) in the September 2019 to October 2020 period. The USDA also predicts that CPO consumption will recover in the next period by 4.2 percent yoy. In a more detailed view, CPO demand actually began to normalize since June 2020.
One of the indicators that show improved demand is export volume from major producing countries, such as Indonesia and Malaysia. Indonesia's CPO export volume in June and July 2020 were 2.1 and 2.4 million tons respectively, the same volume as Indonesia’s CPO exports in June and July 2019.
Similarly, Malaysia’s CPO export volume in June and July were recorded at 1.7 and 1.8 million tons, respectively, higher than the export volume for the same months in 2019. However, Malaysia's CPO export volume in August of 1.6 million tons was slightly lower than in August 2019. Both Indonesia and Malaysia’s CPO export volumes recovered after many countries began to gradually relax their lockdown measures.
From the perspective of consumers, India's CPO import volume in July was recorded at 0.8 million tons, or 1.4 percent higher than the same period in 2019. This is the first positive monthly yoy growth of India’s CPO import volume since August 2019.
Furthermore, the CPO import volume of several European Union (EU) member countries, such as France, Italy and the Netherlands, has gradually recovered since May. On the contrary, China's CPO import volume has not recovered. With the tensions of the US-China trade war not as intense as last year, China appears to have switched back to soy oil from CPO in its vegetable oil consumption, with China’s soybean import volume gradually growing since May.
The recovering CPO demand is also reflected in price hikes. Malaysia’s CPO benchmark price has steadily increased since May until now. The average CPO price in June was US$573 per ton, higher than its average price in May of $504 per ton. The price continued to improve in July and August, hitting $616 and $676 per ton, respectively.
The CPO price even broke the $700 per ton level in early September. The CPO price on Sept. 14 closed at $703 per ton, a decline of 5.5 percent year to date. The average CPO price in the January-September period has been $606 per ton, much higher than the average price in the same period last year at $495 per ton. The CPO price gradually returned to its pre-COVID-19 level in early 2020 and has been one of the fastest to recover among COVID-19 impacted commodities.
