Crude palm oil prices cyclical, says KLK CEO

Crude palm oil prices cyclical, says KLK CEO
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KUALA LUMPUR (Nov 10): Despite the recent surge in crude palm oil (CPO) prices, Kuala Lumpur Kepong Bhd (KLK) group chief executive officer Tan Sri Lee Oi Hian said CPO prices are cyclical and depend on climate change. 

"Commodities are cyclical. We probably forgot that palm oil prices were RM2,000 early last year; everyone forgot it could be RM2,000. Now everybody is just thinking about RM4,000 and RM5,000.

"Palm oil is cyclical — it depends on fluctuations of the weather. We also compete with oilseeds.

"But the good thing about palm oil is that it is very productive. Compared to oilseeds, we (palm oil) meet more than 40% of the demand," Lee said at the Invest Malaysia 2021 Series 3: Sustainable Growth event held virtually on Wednesday (Nov 10).

He added: "That is our advantage. But some non-governmental organisations and advocates cast a very negative, unfair picture of palm oil.

Meanwhile, Lee said Indonesia had a biodiesel policy that would help the country stabilise CPO prices.

On the other hand, he noted that greenfield expansion is very difficult for the plantation sector in the country because the sector would have to meet the requirements of the Roundtable on Sustainable Palm Oil (RSPO).

"I think the plantation sector is more reliant on the ground and productivity growth. We (KLK) have a long way to go, maybe a 20% to 25% productivity growth — that is the way to go," he added.

At Wednesday’s noon break, shares in KLK settled 18 sen or 0.87% lower at RM20.52, with a market capitalisation of RM22.18 billion.

'Increase in windfall profit levy for East Malaysia unfair'

Meanwhile, commenting on Budget 2022 regarding the government’s proposal to increase the windfall profit levy, especially in Sabah and Sarawak from 1.5% to 3%, Lee said the tax is unfair. 

“Although the government has raised the threshold of windfall profit levy for the two states, we know they are not happy about the 3% increase in tax,” he added.

Earlier, palm oil producers from Sabah and Sarawak said the doubling of the tax is unfair.

In a statement on Oct 31, the planters said the 1.5% levy for East Malaysia was implemented by the former government because Sarawak and Sabah growers also had to contend with a state CPO sales tax of 5% and 7.5% respectively after a threshold of RM1,500 per tonne. No other states in Malaysia have this tax, according to them.

"With the doubling of the levy from 1.5% to 3%, the sense of equity seems to have been removed from the East Malaysian states by the present government and [there is] a sense of using the East Malaysian states to subsidise the opportunity losses in the West. It puts a new meaning to 'Keluarga Malaysia'," the planters said.

The statement was jointly issued by the Sarawak Oil Palm Plantation Owners Association, the East Malaysia Planters’ Association, the Dayak Oil Palm Planters Association, the Chinese Chamber of Commerce Tawau, the Tawau Agriculture Association, the Malaysian Estate Owners’ Association and the Chinese Chamber of Commerce Lahad Datu. Collectively, they are known as the East Malaysian Oil Palm Solidarity Group or EMOPSG.

Surin Murugiah