17/02/2010 (Bloomberg) - Palm oil prices may stabilize between $700 and $750 a metric ton this year as China and India buy more of the commodity, Indonesian Trade Minister Mari Pangestu said.

“What we’re seeing is a very strong demand from China and India,” Pangestu said in an interview with Bloomberg Television from Jakarta today. “India is now a larger consumer compared with China because of the reduction in production of oilseeds. Prices of palm oil look like stabilizing around $700 and $750 a ton.”

A strengthening of the price of palm oil, which is also bolstered by gains in soybean and crude oil prices, will help to support non-oil-and-gas exports from Indonesia, targeted to grow between 7 percent and 8.5 percent this year, Pangestu said.

Higher palm oil prices may boost profits for producers, potentially adding to exports earnings from Indonesia and Malaysia, the world’s top growers. Palm oil prices have gained more than 35 percent in the past 12 months.

Strong India and China demand will “really help us to offset the slowdown in demand last year due to the global crisis,” she said.

Indonesia exported 5.6 million tons of palm oil to India last year, or 36 percent of total shipments, while overseas sales to China were 2.4 million tons in 2009, according to data compiled by Bloomberg.

April-delivery palm oil rose 1.7 percent to 2,622 ringgit ($774) a ton on the Malaysia Derivatives Exchange at 11:31 a.m. Jakarta time.

Indonesia is reviewing its policy on palm oil exports levy in a bid to support plan to increase the domestic palm oil industry, Pangestu said.

“We have a long-term plan to increase the value-added of palm oil and give more encouragement to downstream processing,” she said.

Indonesia since 2008 has set export duties based on the average price of palm oil in Rotterdam. The country imposes a 1.5 percent duty on overseas shipments of crude palm oil if the average price reaches at least $700 per ton, a 3 percent tax if it ranges between $751 and $800 and will rise until a maximum of 25 percent if the price reaches $1,250 per ton.

“The export levy is one policy instrument,” Pangestu said. “But right now we haven’t made any conclusive decision on that.”