FGV may be winner from potential rise in palm oil supply to Pakistan — analyst

KUALA LUMPUR (Feb 6): FGV Holdings Bhd could be the winner if palm oil supply to Pakistan rises following the Pakistan government's expression of interest to import more palm oil from Malaysia, said Palm Oil Analytics owner and co-founder Dr Sathia Varqa.

He said the plantation company has a large presence in Pakistan and recently announced to Bursa Malaysia that it is exploring a new investment there.

FGV, via its 65%-owned subsidiary FWQ Enterprises (Private) Ltd, signed memorandum of understanding with Johor Port Bhd on Jan 3 to jointly acquire up to a 25% stake in Fauji Akbar Portia Marine Terminals, an operating dry bulk terminal in Port Qasim, Pakistan.

In 1980, the FGV group entered the Pakistan edible oil market as a supplier of palm olein (refined palm oil) and has continued to supply large volumes of quality palm oil based products to the country.

To date, FGV has invested up to RM98.5 million in Pakistan, by far the largest investment by any Malaysian group.

“Malaysia's January 2020 export (of palm oil) to Pakistan is noticeably higher at 141,500 tonnes compared to the usual monthly volume of 90,500 tonnes. But the question now is, will Pakistan sustain buying at the current volume to compensate for the loss to India?” Sathia told Bernama.

During his bilateral meeting with Prime Minister Tun Dr Mahathir Mohamad, Pakistan's Prime Minister Imran Khan has pledged to buy more Malaysian palm oil to compensate for top buyer India's move to restrict imports from Malaysia.

While welcoming Pakistan's interest, Sathia however expressed doubt whether the country, home to 200 million people, can consume more palm oil compared with India, which has 1.34 billion people.

He also said the edible oil consumption by Pakistan is around 4.50 million tonnes annually while India's is 24 million tonnes.

“So, overall I doubt Pakistan can compensate for the 2.156 million tonnes of refined, bleached and deodorised (RBD) palm olein lost to India. We also have to remember that Indonesia has 70% of the olein market in Pakistan while Malaysia has 30%,” he said.

Sathia suggested that Malaysia and Pakistan enter a special preferential tariff agreement if Malaysia were to capture the slice from Indonesia.

Meanwhile, Malaysian Palm Oil Board director-general Dr Ahmad Parveez Ghulam Kadir applauded Pakistan's effort to buy more palm oil from Malaysia.

“We believe this is due to Primary Industries Minister Teresa Kok's visit to Pakistan last month. We also hope that with our efforts to make Malaysian Sustainable Palm Oil certification mandatory, it will open up more markets for Malaysian palm oil.

“This demand will definitely keep the commodity price at a good level which will be good for around half a million smallholders and their families,” he said.

A Malaysian delegation led by Kok recently visited Port Qasim to gauge the progress of a joint venture (JV) between big companies such as FGV Holdings Bhd, IOI Corp Bhd, and Kuala Lumpur Kepong Bhd with Westbury Group of Pakistan.

The JV companies have five projects in bulking storage, refinery, liquid cargo jetty and oilseed extraction. In the pipeline is another project to provide bulk commodities storage, expected to be commissioned in June 2020.

The JV bulk terminal there (capacity of 138,000 tonnes) handles 50% of palm oil imports into Pakistan while refining capacity has doubled with an additional extraction plant.

Parveez also said the delegation also had meetings with the Pakistan-Malaysia Business Council and Pakistan-Malaysia Friendship Association, discussing issues and suggestions to further strengthen trade between both countries.

“We managed to raise all the trade issues faced by both countries during another meeting with Razaq Dawood, an adviser to Prime Minister Imran Khan.

“Meanwhile, the ministry has also taken some effective steps not only to maintain the Pakistani palm oil market but to continue exploring new markets, namely in the United States, Europe, Africa, Iran and China, by increasing palm oil consumption in the food and non-food sectors,” he added.

At 3:30pm, FGV shares rose three sen to RM1.37 with 5.41 million shares transacted.