CPO prices seen staying weak in Q3, says HLIB

New Straits Times

11 hours ago

KUALA LUMPUR: Crude palm oil (CPO) prices are expected to remain weak going into the third quarter of 2025 (3Q25), with prices likely hovering between RM3,800 and RM4,050 per metric tonne (mt), Hong Leong Investment Bank (HLIB) said.
The firm said this is mainly due to seasonally higher production levels, supported by favourable weather conditions, and the lack of festive-driven restocking activities.
"Additionally, the weak economic viability of discretionary biodiesel blending, due to a persistently wide palm oil and gas oil (POGO) spread, and ongoing uncertainties surrounding trade policies are expected to curb near-term demand for palm oil, thereby capping any meaningful upside in CPO prices," it said.
HLIB noted that crude palm oil (CPO) prices have dropped by around 19 per cent since the beginning of 2025, pressured by stronger supply conditions and subdued demand.
The weaker demand was partly driven by CPO's price premium over other vegetable oils in the first quarter of the year, which dampened buying interest.
"In contrast, the KL Plantation Index recorded a more modest decline of 5.2% over the same period, outperforming FBMKLCI by 2.1 percentage points.
"This suggests that investors may have already priced in the normalisation of CPO prices, while the absence of compelling new investment themes within the FTSE Bursa Malaysia KLCI likely led to sustained interest in the plantation sector," it added.
According to HLIB, CPO prices are expected to improve in the fourth quarter of 2025.
This positive outlook is driven by several factors, including the start of seasonally lower production volumes from September or October, anticipated clarity on trade policy developments, and renewed concerns over the sustainability of palm oil output.
HLIB said the latter stems from years of insufficient replanting and limited new planting, which may begin to affect yields and, in turn, help support CPO prices.
"Following the upside revision to our average CPO price projections and a tweak in our fresh fruit bunches output assumptions, we raise earnings forecasts for plantation companies under our coverage by 1 per cent to 23 per cent," it said.