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.