Home > Uncategorized > Prolonged Lahad Datu crisis may affect CPO output

Prolonged Lahad Datu crisis may affect CPO output

This is written by my colleague Zaidi Ismail.

KUALA LUMPUR: CRUDE palm oil (CPO) production and sales from Sabah, accounting for 30 per cent of Malaysia’s total output, may be affected if the security situation brought about by the terrorist intrusion in the eastern part of the state continues.

However, Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said palm oil refineries in Lahad Datu to date have not been affected as most of them are in industrial areas far from the conflict zones where the security forces are launching operations to flush out armed gunmen from the Philippines.

“No refineries have shut down and none have been affected as they are far from the hostilities,” Dompok told reporters here yesterday after launching the 24th annual Palm and Lauric Oils Conference and Exhibition.

Sabah is one of Malaysia’s top oil palm growing regions with much of the palm oil from the state shipped to China – the world’s second largest consumer of edible oils.

Meanwhile, CIMB analyst Ivy Ng, in her research note on Monday, said the situation there would affect the harvesting, transportation and sales of palm oil from Sabah.

She said a check with Felda Global Ventures (FGV) last Friday revealed that the company was not able to access its 1,000ha estates while Genting Plantations has suspended transportation of CPO from two of its five mills to Lahad Datu.

FGV owns 95,542ha of Sahabat estates which are close to where the intruders landed.

Ng said so far, the impact of this incident on CPO production is still minimal but if the crisis escalates, the impact would be significant.

“This is negative for refiners and planters in Sabah as productivity and shipment of CPO could be affected. For every one per cent change in fresh fruit bunch output, earnings may be dented by up to two per cent,” she said.

KL Kepong came second in terms of the size of its estate exposure in Lahad Datu. It has a refinery there while FGV has two in the Sahabat region.

“The concern for refineries near the areas where clashes have been reported is that planters may not want to transport their CPO to the refineries and may divert their production to other refineries in Sabah for security reasons,” said Ng.

However, she said if the matter is resolved quickly, the impact would be minimal or none as the planters could play catch-up on harvesting and shipments.

CIMB Research, she added, does not think the issue will impact CPO prices significantly given the high stock buffer in Malaysia and Indonesia.

Security forces in the early hours of Tuesday moved into Kampung Tanduo to end a stand-off with the armed intruders after violence killed at least 27 people and sparked fears of broader insecurity in the resource-rich area.

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