Palm | Kelapa Sawit

Plantation stocks topped Bursa Malaysia's gainers list yesterday, buoyed by the announcement on Thursday of a joint initiative by the Malaysian and Indonesian governments to set aside six million tonnes of crude palm oil (CPO) annually for biodiesel (120,500 barrels per day). Previously, we reported that palm oil is a true GDP-booster for both Malaysia and Indonesia, the oil being the second biggest export earner for both countries, and that in 2005 the 'Plantation Index' outperformed all other indexes, including the tech and oil indexes.

The biofuels committment pushes this trend up even further. The rising prices of CPO, which breached RM1,500 (€321/$407) per tonne after stagnating at RM1,400 (€300/$380) in the first six months of this year, have also led to expectation of potentially higher earnings for plantation companies by year-end. Plantation players generally welcomed both governments' initiative to allocate six million tonnes, or 40% of their total annual production, for biofuel and biodiesel production effective this year.

Malaysia's CPO production is estimated at 15 million tonnes this year, with new annual capacity of about 600,000 tonnes. The country's palm oil stockpile stands at 1.6 million tonnes.