30/01/2013 (Borneo Post) - The prices of crude palm oil (CPO) gained yesterday on speculations that exports from Malaysia may increase after Indonesia, the world’s largest palm oil producer, raises CPO export taxes for February shipments.

To recap, Indonesia will raise taxes on crude palm oil exports to nine per cent from 7.5 per cent seen in January, the Indonesian Trade Ministry announced late Monday, potentially curbing shipments as Malaysia maintained a zero-tariff policy for February.

The Borneo Post observed that CPO contracts for delivery in April on Bursa Malaysia Derivatives ended the day yesterday at RM2,476 per tonne, an increase from RM2,445 seen at closing last week.

Financial markets were closed on Monday for Thaipusam celebrations.

“The increase in the export tax rate is in line with the improvement in palm oil prices.

“The Indonesian government reviews the tax rates monthly in accordance to prices in Jakarta, Kuala Lumpur and Rotterdam,” outlined research firm AmResearch Sdn Bhd (AmResearch) in a related report.

“It appears that the Indonesian government has not succumbed to pressure from the Indonesian Palm Oil Association (GAPKI) to reduce the export tax rate for CPO to zero,” it added.

Recently, it was highlighted that GAPKI was seeking to reduce the CPO export tax rate in response to Malaysia’s zero CPO export tax rate in February.

“It also appears that the Indonesian Government has chosen to assist the palm oil refiners instead of the upstream players in the country,” AmResearch underscored.

“The reduction of the CPO export tax rate would have resulted in higher cost of feedstock for the Indonesian refiners.

“This would have reduced their cost competitiveness against the Malaysian palm oil refiners.” With this in mind, AmResearch expected CPO prices to improve in the near future, underpinned by softening palm oil production and favourable demand.