adminKUALA LUMPUR: Escalating geopolitical conflicts in West Asia have pushed up crude palm oil (CPO) prices by about 10 percent to RM4,592 per tonne since last week, pushing up crude oil prices and creating concerns about rising energy and fertilizer costs.
According to Hong Leong Investment Bank Bhd (HLIB), while it is still unclear how long geopolitical tensions will continue and to what extent the rise in CPO prices can be sustained, the current surge in CPO prices is expected to support the earnings of plantation companies in the short term, especially upstream players given their high operational leverage on CPO prices.
“We are relieved that most of the companies under our coverage have met their fertilizer requirements for the current financial year,” he said in a research note today, adding that the surge in crude oil prices has also made biodiesel attractive again.
He said prolonged tensions could increase production costs in the long term as the conflict would drag on and disrupt trade flows through the Strait of Hormuz.
In addition, fertilizer prices are expected to increase further due to limited supply and higher transportation costs, according to the investment bank.
“This could result in higher fertilizer procurement costs when plantation companies negotiate for the next tender, potentially increasing the cost of MSM production in the subsequent period,” he said.
However, HLIB maintains its 2026 average CPO price expectation of RM4,200 per tonne for now, pending further developments on geopolitical uncertainties in West Asia.
— BERNAMA
