European crude palm oil prices could rise to average $610 per tonne including cost, freight and insurance (CIF Rotterdam) in the first half of 2020 on the back of rising demand and slowing production growth, leading industry analyst Thomas Mielke said.
"Price rise is expected due to a slow down in global production growth, rise in demand for biodiesel sector, particularly from Indonesia, and rising palm oil requirement of India and China," Mielke, editor of Oil World, the Hamburg, Germany-based newsletter, said at a conference on Friday.
Benchmark palm oil prices fell to a six-week low earlier this week, and closed at 2,150 ringgit ($512.88) a tonne, down 0.88%, on Friday, while CPO prices in Rotterdam were at $532.5 a tonne on Thursday.
Indonesia palm oil prices in the first half of next year could average $580 per tonne on a free-on-board basis, Mielke said. Indonesia is the world's biggest producer of the tropical oil followed by Malaysia.
Mielke said world palm oil consumption could surpass production in 2019/20 as growth in production is expected to slow to 2 million tonnes from 4.8 million tonnes a year ago. Indonesia's 2020 palm oil production could rise 4.8% from a year ago to 46 million tonnes in 2020, while Malaysia's output next year could fall slightly from 20.5 million tonnes in 2019, he said.
Dry weather and an ongoing haze are expected to impact palm oil production across Southeast Asia and reduce output growth this year, as oil palm trees need moisture for optimal fruit production. Biodiesel demand has been rising in the producing countries, which are keen to use more palm oil as biofuel, Mielke said.
Indonesia currently has a biodiesel mandate of 20% bio-content, known as the B20 programme, and is aiming to implement a 30% bio-content mandate by January 2020.
Malaysia increased its biodiesel mandate from 7% to 10% last December and aims to implement a B20 programme in 2020. Along with biofuel, demand is also rising for food from India and China, the world's top two buyers of palm oil, Mielke said.
China's edible oils and fats imports could rise 11 percent in 2019/20 to a record 13.1 million tonnes, including shipments of 7.2 million tonnes of palm oil, he said.