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Bursa Malaysia Derivatives Completes First Physical Delivery of East Malaysia Crude Palm Oil Futures

Bursa Malaysia Derivatives Completes First Physical Delivery of East Malaysia Crude Palm Oil Futures in Sabah

A worker loads palm fruits onto a lorry at a plantation in Sepang October 30, 2019. — Picture by Shafwan Zaidon

Bursa Malaysia Derivatives Bhd has completed the first physical delivery of its East Malaysia Crude Palm Oil Futures Contract (Fepo) in Sabah on February 17, 2022.

The delivery saw a total of eight contracts, representing 200 tonnes of crude palm oil (CPO) transacted between the seller, Green Edible Oil Sdn Bhd, and the buyer, Kunak Refinery Sdn Bhd at one of the approved Port Tank Installations in East Malaysia, namely in Sandakan, Sabah.

The Port Tank Installation is operated by Sawit Bulkers Sdn Bhd, a wholly-owned subsidiary of Sawit Kinabalu Group, which is the premier investment arm of the Sabah state government in the oil palm industry.

“The successful and orderly completion of the first physical delivery for Fepo contracts demonstrates the demand from Sabah producers to sell their CPO through an alternative platform with greater price transparency,” Bursa Malaysia Derivatives chief executive officer Samuel Ho Hock Guan said in a statement.

He said the Fepo contract benefits Sabah refiners and buyers by allowing them to source CPO at competitive pricing.

It also enables them to manage price risk and hedge against unfavourable price movement in the physical market, especially during the low-supply season.

Meanwhile, Sawit Kinabalu Group managing director Datuk Bacho Jansie said the availability of Bursa Malaysia Derivatives’ Fepo contract provides East Malaysia market participants with an additional trading opportunity as well as an improved price discovery mechanism and more physical delivery options in Sabah and Sarawak.

“As one of the designated delivery ports in Sabah, we hope to attract more market participants to lease out our available tanks and further increase the visibility of the East Malaysia palm oil market,” he said.

The Fepo contract, which went live on October 4, 2021, provides East Malaysia CPO market participants with a new avenue to engage in physical deliveries and hedge their positions in the physical CPO market.

It also strengthens Bursa Malaysia Derivatives’ Palm Complex offerings and provides price transparency in the East Malaysia CPO market, further cementing Malaysia’s position as the global centre for palm oil price discovery.

From its launch date to February 8, 2022, Bursa Malaysia Derivatives recorded a total trading volume of 3,250 contracts which is equivalent to 81,250 tonnes of CPO.


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