MARKET DEVELOPMENT
CPO Export Tax Hike To Benefit Refiners
CPO Export Tax Hike To Benefit Refiners
17/03/2016 (New Straits Times) - Malaysia has raised its tax on crude palm oil (CPO) exports to five per cent for April, ending an 11-month span of CPO being shipped out tax-free.
In a telephone interview with Business Times, a refiner, who did not want to be identified, heaved a sigh of relief.
“Finally, with imposition of the five per cent duty on CPO exports, the downstream businesses here stand a better chance to compete when we export refined palm oil.
“For the past seven or eight months, refiners in Indonesia have been sourcing CPO from Malaysia, leaving us in an uncompetitive state. That had caused many refiners’ capacity in Malaysia to drop to an unhealthy rate of nearly 50 per cent from 80 per cent,” he added.
The CPO export duty in Malaysia fluctuates on a monthly basis. If the palm oil price hovers between RM2,250 and RM2,400 a tonne, the tax is 4.5 per cent. If palm oil prices were to jump to RM3,450 per tonne, the tax would be 8.5 per cent.
Exports of duty-free CPO dims the investment climate for refiners in Malaysia.
With the five per cent CPO export tax, refiners here would stand a better chance of buying more CPO and further reduce the stock levels in the country. This will spur refining activities and players would be able to reap economies of scale and stay in the business. KL Palm Services Sdn Bhd managing director Ling Chen Eng told Business Times yesterday more could be done to further narrow the discount gap between Malaysia and Indonesia to level the playing field.
KL Palm Services, which is among the top three palm oil brokerages in the world, deals with traders from Malaysian and Indonesian plantation companies as well as palm oil buyers in China, India, Europe and the United States.
Ling noted that last year, Indonesian President Joko Widodo signed a regulation requiring exporters to pay a levy of US$50 (RM208) per tonne of CPO and US$30 for processed palm oil product shipments.
Since then, Indonesia’s palm oil industry enjoyed a competitive pricing advantage to the detriment of Malaysia’s palm oil sector.
To level the playing field for Malaysia, Ling suggested that the government consider adding another tier to the existing CPO export duty structure of RM2,100 per tonne from the current RM2,250 per tonne.
The latest data from Malaysian Palm Oil Board revealed that since 2010, Malaysia has been exporting more CPO and less refined palm oil.
In the first two months of this year, 34 per cent of palm oil produced by planters were shipped out as CPO. This means as the years go by, there is less raw material available for local refineries.
This trend contradicts the objective of the government to encourage value adding of the palm oil supply chain.
“Malaysia’s CPO tax structure should be reviewed for the long term to sustain the health of the industry,” said Ling.
In a telephone interview with Business Times, a refiner, who did not want to be identified, heaved a sigh of relief.
“Finally, with imposition of the five per cent duty on CPO exports, the downstream businesses here stand a better chance to compete when we export refined palm oil.
“For the past seven or eight months, refiners in Indonesia have been sourcing CPO from Malaysia, leaving us in an uncompetitive state. That had caused many refiners’ capacity in Malaysia to drop to an unhealthy rate of nearly 50 per cent from 80 per cent,” he added.
The CPO export duty in Malaysia fluctuates on a monthly basis. If the palm oil price hovers between RM2,250 and RM2,400 a tonne, the tax is 4.5 per cent. If palm oil prices were to jump to RM3,450 per tonne, the tax would be 8.5 per cent.
Exports of duty-free CPO dims the investment climate for refiners in Malaysia.
With the five per cent CPO export tax, refiners here would stand a better chance of buying more CPO and further reduce the stock levels in the country. This will spur refining activities and players would be able to reap economies of scale and stay in the business. KL Palm Services Sdn Bhd managing director Ling Chen Eng told Business Times yesterday more could be done to further narrow the discount gap between Malaysia and Indonesia to level the playing field.
KL Palm Services, which is among the top three palm oil brokerages in the world, deals with traders from Malaysian and Indonesian plantation companies as well as palm oil buyers in China, India, Europe and the United States.
Ling noted that last year, Indonesian President Joko Widodo signed a regulation requiring exporters to pay a levy of US$50 (RM208) per tonne of CPO and US$30 for processed palm oil product shipments.
Since then, Indonesia’s palm oil industry enjoyed a competitive pricing advantage to the detriment of Malaysia’s palm oil sector.
To level the playing field for Malaysia, Ling suggested that the government consider adding another tier to the existing CPO export duty structure of RM2,100 per tonne from the current RM2,250 per tonne.
The latest data from Malaysian Palm Oil Board revealed that since 2010, Malaysia has been exporting more CPO and less refined palm oil.
In the first two months of this year, 34 per cent of palm oil produced by planters were shipped out as CPO. This means as the years go by, there is less raw material available for local refineries.
This trend contradicts the objective of the government to encourage value adding of the palm oil supply chain.
“Malaysia’s CPO tax structure should be reviewed for the long term to sustain the health of the industry,” said Ling.