PALMOILMAGAZINE, KUALA LUMPUR – Prices of crude palm oil (CPO) and palm kernel (PK) are expected to remain firm through 2026, supported by the prospect of a moderate decline in Malaysia’s palm oil production and tightening global supplies of lauric oils.
In its latest research report, CIMB Securities Sdn Bhd said the outlook was discussed during a Lauric Oils Seminar held on February 9, featuring experts from Glenauk Economics, including Leow Huey Chuen, Julian McGill, and Peter Smith.
Leow noted that palm oil prices have shown resilience and rebounded despite relatively high inventory levels in Malaysia. The recovery has been supported by stronger fund sentiment and actual production figures coming in below earlier expectations.
As reported by New Straits Times, Malaysia’s palm oil production is projected to decline moderately in 2026, while Indonesia is expected to post modest production growth. This combination could gradually tighten global inventories in the coming months.
Tight Palm Oil Supply Supports Palm Kernel Prices
Meanwhile, McGill said palm kernel prices are likely to stay firm, supported by relatively flat supply, declining kernel extraction rates, and limited availability of coconut oil in global markets.
These factors are expected to limit the potential for oversupply in the near term, even though demand from the oleochemical sector may soften slightly.
Also Read: Riau Independent Palm Oil FFB Prices Increase for March 4–10, 2026 Period
The oleochemical industry itself is anticipated to face challenges between 2025 and 2027, particularly due to overcapacity and margin pressure.
However, the specialty fats segment is expected to perform better, driven by product reformulation trends and increased use of palm-based fractions.
Demand for palm-based specialty fats is considered resilient and capable of absorbing lauric oil supply amid current tight market conditions.
Also Read: KPBN CPO Price Rises 1.01% as Malaysian Palm Oil Futures Hit Five-Week High
Upstream Companies May Benefit
CIMB Securities believes that relatively strong CPO and PK prices could create positive sentiment for plantation companies with significant upstream exposure.
Companies that may benefit include SD Guthrie Bhd, Hap Seng Plantations Holdings Bhd, Genting Plantations Bhd, United Malacca Bhd, and Ta Ann Holdings Bhd.
In addition, the use of palm mid fractions and palm kernel derivatives in applications such as coatings, non-dairy creamers, and specialty food products is expected to support long-term demand for palm oil.
Also Read: North Sumatra Sets Higher Palm Oil FFB Prices for March 4–10, 2026
On the other hand, rising production capacity in the oleochemical industry could pressure companies with significant downstream exposure, including IOI Corp Bhd and Kuala Lumpur Kepong Bhd (KLK).
Still, the impact may be partly offset by the strength of their upstream segments, which provide more stable raw material supply and help maintain downstream margins.
CIMB also noted that the downstream performance of IOI Corp and KLK likely reached its lowest point in financial year 2025, following the margin pressures experienced earlier.
As a result, CIMB maintains an “Overweight” outlook on the sector, with SD Guthrie, IOI, and Hap Seng Plantations remaining its top picks. (P2)
