MARKET DEVELOPMENT
India\'s Higher Import Duty On RBD To Be Positive For Malaysian Export Demand
India\'s Higher Import Duty On RBD To Be Positive For Malaysian Export Demand
13/08/2013 (Bernama) - The expected higher import duty to be imposed by India for refined bleached deodorised (RBD) palmolein will be a positive catalyst for crude palm oil (CPO) prices and Malaysian export demand, says Alliance Research.
The research house is maintaining a neutral call on the industry.
CPO prices are still trending below RM2,300 per metric tonne.
It has been reported that the Indian government may hike the import duty on refined palm oil (mainly RBD palmolein), from the current 7.5 per cent.
The intention is to widen the import duty difference between crude palm oil and refined oil, to sustain its domestic refining industry.
With a 2.5 per cent duty on CPO, the current duty differential is five per cent, resulting in a higher import of cheap refined oil, making things difficult for domestic refiners.
Although, the industry wants a duty hike on CPO too, the consensus at the moment seems to be on raising duty on refined oil only.
The industry is also demanding that the duty differential between refined and crude palm oil should be at least 14 per cent for the domestic refining sector to be sustainable.
"With Malaysian export taxes on CPO set at zero per cent for August and Indonesia's latest export duties at more than 10 per cent, we view India's move to be positive for Malaysian export demand, thus, keeping inventories manageable.
"We maintain a neutral call, with some expectation that CPO prices can recover slightly by year-end," Alliance Research said in a research note today.
It said year-to-date exports from Malaysia to India had been waning and as of end-June, was down 10 per cent.
This is due to India taking more RBD palmolein from Indonesian refiners (which is slightly cheaper than Malaysia) and also by a weak rupee which is hampering imports.
Explaining further, the research house said should exports of CPO to India increase, it would be overall positive for the industry and could result in Malaysia's inventory levels staying below two million metric tonnes, despite the upcoming seasonal peak cycle in production.
India is currently the second largest purchaser of Malaysian palm oil products, making up some 11 per cent of the total year-to-date exports.
Alliance Research also expects inventories to remain at June levels of 1.65 million metric tonnes, given positive export data from cargo surveyors for the Malaysian Palm Oil Board July statistics, to be released tomorrow.
"That said, we still see some downside risk to our current CPO average selling prices of RM2,480 per metric tonne, and could make a downward revision of up to between RM100-RM150 per metric tonne to closer match the year-to-date average of RM2,323 per metric tonne.
The research house is maintaining a neutral call on the industry.
CPO prices are still trending below RM2,300 per metric tonne.
It has been reported that the Indian government may hike the import duty on refined palm oil (mainly RBD palmolein), from the current 7.5 per cent.
The intention is to widen the import duty difference between crude palm oil and refined oil, to sustain its domestic refining industry.
With a 2.5 per cent duty on CPO, the current duty differential is five per cent, resulting in a higher import of cheap refined oil, making things difficult for domestic refiners.
Although, the industry wants a duty hike on CPO too, the consensus at the moment seems to be on raising duty on refined oil only.
The industry is also demanding that the duty differential between refined and crude palm oil should be at least 14 per cent for the domestic refining sector to be sustainable.
"With Malaysian export taxes on CPO set at zero per cent for August and Indonesia's latest export duties at more than 10 per cent, we view India's move to be positive for Malaysian export demand, thus, keeping inventories manageable.
"We maintain a neutral call, with some expectation that CPO prices can recover slightly by year-end," Alliance Research said in a research note today.
It said year-to-date exports from Malaysia to India had been waning and as of end-June, was down 10 per cent.
This is due to India taking more RBD palmolein from Indonesian refiners (which is slightly cheaper than Malaysia) and also by a weak rupee which is hampering imports.
Explaining further, the research house said should exports of CPO to India increase, it would be overall positive for the industry and could result in Malaysia's inventory levels staying below two million metric tonnes, despite the upcoming seasonal peak cycle in production.
India is currently the second largest purchaser of Malaysian palm oil products, making up some 11 per cent of the total year-to-date exports.
Alliance Research also expects inventories to remain at June levels of 1.65 million metric tonnes, given positive export data from cargo surveyors for the Malaysian Palm Oil Board July statistics, to be released tomorrow.
"That said, we still see some downside risk to our current CPO average selling prices of RM2,480 per metric tonne, and could make a downward revision of up to between RM100-RM150 per metric tonne to closer match the year-to-date average of RM2,323 per metric tonne.