Palm oil price plunge hurting M'sia's export values: Barclays

Source：December 13, 2012 | Business Tim Release Date：2012-12-14 263

Food & Beverage

With prices down 43% from April peak, a sustained fall will erode current account surplus

By Pauline Ng in Kuala Lumpur

THE drastic drop in palm oil prices to about RM2,045 (S$816.70) a tonne has hurt Malaysia's export values and terms of trade and a continuing decline is likely to have an adverse bearing on its current account surplus, said Barclays Research.

Prices are at 2009 levels having fallen 43 per cent since peaking in April 2012 because of an oversupply of crude palm oil (CPO) and lower demand from major consumers India and China. Shipments of CPO have fallen for nine straight months with the latest drop of slightly over a fifth occurring despite an improvement in the volume of oil shipments, said the British bank in a report dated December 10.

Exports of CPO account for about 60 per cent of the trade surplus of Malaysia, which is the second largest producer in the world after Indonesia.

"Hence, a sharp decline in export value can have a negative bearing for the current account surplus," observed Barclays analyst Rahul Bajoria who estimated a RM100 drop in CPO prices leads to a RM1.8 billion reduction in the trade surplus annually. However, he noted that in volume terms, exports have seen a recovery in the last two months and may revert to growth in November.

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