KUALA LUMPUR, Mar 5: Three Malaysian palm oil refineries with a combined capacity of 1.8 million tonnes plan to halt operations if a Malaysian military attack on an armed Filipino group on Borneo island drags on, refinery officials told Reuters on Tuesday.
‘The three companies owning these refineries are looking to cease operations if it becomes worse and there is a high chance it will happen,’ said a refinery official with direct knowledge of the matter.
Singapore’s Wilmar International and Malaysia’s KL Kepong and Kwantas Corp own the refineries and have been slowing operations following a curfew imposed by authorities last week after Filipino gunmen attacked Malaysian security forces in Sabah.
Company officials declined to comment.
Sabah is Malaysia’s top oil palm growing region, accounting for a quarter of national production. Much of the palm oil from Sabah is shipped to China — the world’s second largest consumer of edible oils.
Benchmark Malaysian palm oil futures <0#FCPO:> slipped in early trade on Tuesday ahead of the second day of an industry conference in Kuala Lumpur. Traders said prices could recover a little on concerns over the possible supply disruptions in Sabah.
‘As it is, there are police roadblocks in the Lahad Datu, which creates delays for oil palm fruits to be sent to mills and then refineries,’ said a Malaysian trader with a foreign commodities brokerage, referring to the nearest town to the military operations.
‘Palm oil will go through but we are going to see some delays for sure.’
CIMB Investment Bank said in a note to clients that plantation companies and refineries in peninsular Malaysia and Indonesia may benefit as crude palm oil demand may shift to these areas from Sabah on Borneo.
‘It may be marginally positive for crude palm oil prices,’ CIMB said.
The most affected plantation company is likely to be Felda Global whose oil palm estates and one refinery are the closest to the village where the armed Filipino group have been holed up for the past three weeks.
The army in the early hours of Tuesday moved into the village, trying to end a standoff after violence that killed at least 27 people and sparked fears of broader insecurity in the resource-rich area.
(agencies)
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