US reciprocal tariffs to negatively impact CPO prices, may prompt earnings cut — CIMB Securities

CIMB Securities believes that the US-China trade war will significantly impact crude palm oil (CPO) prices, with lower crude oil prices potentially reducing the viability of biodiesel mandates and leading to a decrease in CPO prices. Despite near-term risks, CIMB Securities maintains an "overweight" stance on the sector due to limited direct exposure to US tariffs and potential long-term structural supply issues exacerbated by the tariffs. The tariffs will raise the cost of palm oil for US end-users, possibly driving them to substitute palm oil with domestic alternatives like soybean oil, benefiting US soybean farmers. However, the US is a small consumer of palm oil, accounting for only 2.4% of global usage, and the majority of palm oil imports are from Indonesia. China's new 34% tariff on US goods, effective April 10, is expected to shift China's soybean purchases towards tariff-free countries like Brazil, but logistical constraints may limit how quickly China can meet its demand.

CIMB Securities believes the crude palm oil (CPO) prices will be significantly impacted by the US-China trade war-led tariffs on the commodity, amid lower crude oil price. “Lower crude oil prices, if sustained, may reduce the viability of biodiesel mandates and exert downward pressure on CPO prices. “We maintain our 2025 average CPO price forecast at RM4,200 per tonne. “We estimate that every RM100 per tonne change in CPO price could impact FY2025 earnings for planters under our coverage by 3% to 7%,” said the house in a note on Monday. Despite near-term risks, CIMB Securities retained its “overweight” stance on the sector, given limited direct exposure to US tariffs and potential long-term structural supply issues that may be exacerbated by the tariffs. Palm oil exports to the US will be subject to a 10% import tariff starting immediately. Beginning April 9, US tariffs will increase to 24% for Malaysian palm oil, and to 32% for Indonesian palm oil. “These tariffs will raise ...