InfoSAWIT, KUALA LUMPUR – Public Investment Bank Bhd is maintaining its neutral stance on Malaysia’s plantation sector, projecting that crude palm oil (CPO) prices will remain stable in the second half of 2025. Prices are expected to range between RM4,000 and RM4,300 per ton, supported by inventory levels exceeding 2 million tons and rising export momentum.
In a research note released Friday, the bank said CPO price stability is underpinned by price advantages over soybean oil and growing demand from India.
“As of this report, CPO futures stand at RM4,330 per ton. Export momentum, particularly to India, is expected to improve due to lower domestic stocks and favorable price gaps,” the report stated, as quoted by The Edge Markets on Monday (28/7/2025).
The average CPO price forecast for 2025 remains at RM4,200 per ton. The bank recommends two top picks—Sarawak Plantation and Ta Ann—both offering dividend yields of 5%–6%.
Although higher minimum wages and fertilizer costs impacted production in early 2025, costs are expected to ease in the second half, driven by higher fresh fruit bunch (FFB) yields and income from palm kernel by-products.
“Improved productivity and revenue from palm kernel derivatives should help reduce costs,” the report noted.
Another cost-saving factor is the upcoming implementation of a mandatory 2% contribution to the Employees Provident Fund (EPF) for foreign workers starting October 2025, expected to cut labor costs by less than 1%.
On the policy front, Indonesia’s B40 biodiesel program remains on track and is forecasted to support long-term demand for palm oil as a biofuel feedstock.
However, environmental risks persist, with hotspots increasing in Sumatra and Kalimantan, potentially leading to cross-border haze if dry conditions continue.
Meanwhile, Malaysia’s oleochemical industry continues to struggle due to weak global demand and ongoing price volatility—especially for exporters reliant on palm kernel oil.
Regarding international trade, the US decision to impose a 25% tariff on Malaysian palm oil products is expected to have minimal impact.
“Despite making Malaysian products less competitive, the US accounted for less than 3% of total palm oil exports in 2024, so the impact is limited,” the bank noted.
Conversely, the US plan to expand its biofuel mandate could raise soybean oil prices—improving palm oil’s global competitiveness.
Overall, Public Investment Bank remains cautiously optimistic that export recovery, cost reductions, and biofuel demand will bolster the Malaysian palm oil sector in the months ahead. (T2)
