• Inventory improved 0.5% mom to 2.03m tonnes

• CPO production declined slightly to 1.651m tonnes from 1.653m tonnes in April

• Palm oil exports surged 10.7% mom to 1.37m tonnes.

• Maintain Neutral on the sector with target average CPO price of RM2,300/MT for 2020.

Closing stocks eased to 2.03m tonnes in May

Inventory in May 2020 eased slightly to 2.034m tonnes from 2.045m tonnes in April (- 17% yoy) supported by an increase in export and 34% drop in imports of 37.1k tonnes from 56.6k tonnes in Apr 2020. The slight decline in inventory reflects the 4.6% drop in CPO stocks of 997k tonnes during the month, mainly attributed by lower production and higher demand, especially from China, as the country’s economic activities returned to normal in May 2020. Nonetheless, PPO’s stocks (processed palm oil) increased 3.8% mom to 1.04m tonnes. We expect stock level to remain elevated at this current level as production enters the productive season cycle.

Export surged 10.7% to 1.37m tonnes

Palm oil export volume increased 10.7% mom to 1.369m tonnes in May 2020 as major importing countries like China, Pakistan, Vietnam and Africa increased their intake of PO. We foresee that exports would gradually improve until end-3Q20, as most countries are easing the movement control order by opening up more economic activities especially in the hotels, restaurants and cafeteria business, hence, increasing restocking activities.

Source: BIMB Securities Research - 10 Jun 2020