RM1t exports achievable with palm oil, LNG shipments

With some lingering adverse reactions of the trade war, consumables like palm oil and LNG will mitigate the impact, at least for the rest of the year, says analyst


PALM oil and liquefied natural gas (LNG) shipments are expected to be the prime movers that will enable the country’s exports to reach the RM1 trillion target that has been set by the Ministry of International Trade and Industry.

MIDF Amanah Investment Bank Bhd head of research Mohd Redza Abdul Rahman said the feat is doable based on the domestic exports data, mainly from the agriculture sector, especially palm oil, and the oil and gas (O&G) sector.

He said since both are high value-added sectors to the country’s economy, the target of achieving RM1 trillion in overall exports is attainable.

“Additionally, the headline monthly export numbers have recovered back to above RM80 billion since the decline to RM67 billion back in February 2019,” he told The Malaysian Reserve recently.

Despite the weakening palm oil prices, Mohd Redza said the rise in shipment volume has provided a higher export number.

On a year-on-year (YoY) basis, exports increased 2.5% to RM84.1 billion, while domestic exports recorded an increase of 8.8% or RM5.8 billion to RM71.6 billion.

The main products which attributed to the expansion were palm oil and palm oil-based products (7.4% of total exports), which grew RM437.8 million (+7.6%) to RM6.2 billion.

Exports of palm oil — the major commodity in this group of products — increased RM663.6 million or 20.8% YoY due to the increase in export volume (+44%) as average unit value decreased 16.1%.

Palm oil and palm oil-based products also grew RM1 billion or 19.8% from RM5.2 billion on a month-onmonth (MoM) basis.

Exports of palm oil increased RM776.2 million or 25.3% due to the increase in export volume (+27.5%) as average unit value decreased 1.7%.

“Sales of palm oil and its products skyrocketed after 16 months being in the negative territory. This was mainly due to higher sales to India — Malaysia’s biggest palm oil buyer — which rose rapidly by 305.8% YoY, despite the US$5 (RM20.60) per tonne increase in base import price of crude palm oil,” Mohd Redza said.

He added that Malaysia will continue to benefit from the preferential tariff agreement with India compared to other Asean exporting countries including Indonesia, on top of the memorandum of understanding signed between Malaysia and China to buy additional 1.9 million tonnes of palm oil in the span of five years (2019-2023).

As for the O&G sector, Mohd Redza said a recovery in LNG shipment is anticipated, which in turn would strengthen the country’s export numbers.

LNG, which accounted for 3.5% of total exports, decreased RM162.7 million or 5.2% YoY to RM3 billion due to the decrease in export volume (-6.4%) as average unit value increased 1.3%.

On a MoM basis, LNG decreased RM630.4 million or 17.5% from RM3.6 billion due to decreases in both export volume (-14.2%) and average unit value (-3.9%).

Mohd Redza said domestic exports have been recording a high single-digit growth, despite moderating from a double-digit growth of 11.9% YoY in the prior month.

“Nevertheless, the six consecutive months of positive growth indicates a good momentum for this year and provides brighter outlook for GDP growth in the second quarter of 2019 (2Q19) as domestic exports involve high value-added activities.

“So with some lingering adverse reactions of the trade war, consumables like palm oil and LNG will mitigate the impact, at least for the rest of the year,” he said.

Mohd Redza said there are so many external factors to look at such as changes on monetary policies (a few countries including the US might do rate cuts) and progress of trade negotiations, which will impact demand and supply of the country’s products for exports.

On trade between the US and China, exports to the former grew higher, while the latter recover marginally.

Malaysia’s exports to the US (9.3% share) expanded by a double-digit growth of 11.7% YoY, after a rebound of 3.1% YoY in the preceding month.

Meanwhile, exports to China (13.4% share) continued to register negative growth, but at a slower rate of -2.2% YoY (April 19: -6.9% YoY).

Regionally, exports to Asean (29.4% share) grew 4.7% YoY, but eased from 7.2% growth in April 2019.