DUH! DUE TO CORONA, CPO PRODUCERS THREATEN TO CUT TARGET
12 February 2020
Issuers of palm oil producers have begun to revise their sales and profit targets in the first quarter of 2020. A decline in sales could potentially occur because the impact of the coronavirus has caused demand for crude palm oil (CPO) to fall.
President Director of PT Mahkota Group Tbk (MGRO) Usli Sarsi said the corona virus has worried everyone. Inevitably, Mahkota Group began to recalculate the target of achieving financial performance this year.
“We will also revise the target by looking at the current conditions. Because the handling of this virus is ongoing. If in 2 to 3 months it can be handled, I think the revision is not too far away,” Usli told in a telephone dialog with CNBC Indonesia, Tuesday (11/2/2020).
According to Usli, Indonesia is entering an unfavorable condition due to the coronavirus outbreak that has killed 1,011 people. This has disrupted the world economy, including Indonesia.
“We are now entering an unfavorable condition. This is not only affecting the palm oil industry but the entire world economy,” Usli said.
On the same occasion, Indonesian Palm Oil Association (Gapki) Secretary General Kanya Lakshmi Sidarta said that if the coronavirus is not contained within three months, it will have a serious impact on the Indonesian palm oil industry.
“If it continues for three months, I don't know. There is indeed a (market) shift. Previously, China shifted to other countries. But this cannot go on forever. China, India and Europe are still the biggest markets. If shipments to China are disrupted, the impact will be as big as we have been trading with China,” said Lakshmi, during an interview with CNBC Indonesia, Tuesday (02/11/2020).
Laksmi explained that the disruption of exports to China would have the same impact as when CPO from Indonesia was not absorbed by the European market.
“So now in Indonesia, for palm oil there are two issues, namely to Europe and China,” Lakshmi added.
According to Gapki data, exports of CPO and its derivative products in 2019 reached 36.17 million tons. China became the largest export market with 6 million tons (excluding oleochemical and biodiesel products).
Besides China, the second largest CPO exports were to India at 4.8 million tons and the European Union at 4.6 million tons. Especially for oleochemical and biodiesel products, the largest export was to China at 825 thousand tons, followed by the European Union at 513 thousand tons. Palm oil exports to Africa reached 2.9 million tons in 2019, up 11% from 2.6 million tons in 2018.
The export value of palm oil products including oleochemicals and biodiesel in 2019 is estimated to reach US$ 19 billion. The export value dropped 17% compared to 2018, which reached US$ 23 billion.
This is a negative sentiment for the national palm oil industry. This was reflected in the decline in the agribusiness sector index on the Indonesia Stock Exchange (IDX) which fell by 13.17%, which was the largest sectoral index correction.