Plantation Sector - Newsflow for week 25-29 November Overweight

Last week, Indonesia held a palm oil conference in Bandung. The conference focused mainly on biodiesel.
- It was reported that Indonesian Biofuels Producers Association would be taking European Union’s (EU) anti-dumping duty on Indonesian biodiesel to WTO (World Trade Organisation).
- The Indonesian Biofuels Producers Association also said that it would be seeking other export markets for biodiesel since EU has imposed an anti-dumping duty on its products.
- EU’s anti-dumping duty on Indonesian biodiesel ranges from 8% to 21% (Euro 76.94/tonne to Euro 178.85/tonne). Wilmar International’s subsidiary in Indonesia is subject to a rate of 20% or Euro 174.91/tonne while PT Ciliandra Perkasa faces an anti-dumping duty of 8.8% or Euro 76.94/tonne.
- In another development, Indonesian Palm Oil Association said that about three million tonnes of palm oil would be used for biodiesel annually.
- We believe that this is an optimistic figure. A Reuters article on 27 November quoted Indonesian Biofuel Producers Association as saying that Indonesia’s current biodiesel consumption is estimated at five million barrels per year (0.7mil tonnes), about half of the 9.4mil (1.3mil tonnes) barrels that it would be using under the current policy of B10.
- We reckon that the successful implementation of B10 would depend on its pricing, distribution and infrastructure channels.
- Finally, independent cargo surveyors reported that Malaysian palm oil exports in the 25 days of November declined by 0% to 2.3% compared to the same period in October.
- According to SGS, palm oil shipments to China fell by 13% while Pakistan bought 65% less palm oil. These were partly mitigated by an 86.8% increase in demand from India and 36.8% climb in shipments to US.
- We have an OVERWEIGHT stance on the plantation sector. We have BUYs on IOI Corporation and Sime Darby.
Source: AmeSecurities