MARKET DEVELOPMENT
UPDATE 2-Indonesia President Signs Palm Export Levy to Fund Biodiesel
UPDATE 2-Indonesia President Signs Palm Export Levy to Fund Biodiesel
(Revises timing of new levy, adds analyst comment)
07/05/2015 (Reuters) - Indonesian President Joko Widodo has signed a regulation requiring exporters to pay a levy of $50 per tonne of crude palm oil (CPO) and $30 for processed palm oil product shipments, officials said on Wednesday.
Indonesia is the world's top producer of the edible oil. The regulation, announced in late March, will fund recently announced biodiesel subsidies and could underpin palm prices if biodiesel demand picks up.
"The CPO supporting fund was signed by the president last night," Rida Mulyana, director general of renewable energy at the energy ministry, told reporters. "The threshhold for export tax is unchanged."
Chief Economic Minister Sofyan Djalil told reporters the levy would generate $750 million a year and be implemented in the fourth week of May.
In neighbouring Malaysia, plantations and commodities minister Douglas Uggah Embas said government and industry officials would advise on any policy response.
Ong Keng Wee, an analyst at Affin Hwang Capital Research, told Reuters the policy "over time ... will increase consumption and reduce stocks, and that will help prices."
Benchmark Malaysian palm oil futures climbed to their highest level in a month. The benchmark, which fell nearly 15 percent last year, closed on Wednesday at 2,183 ringgit ($611) per tonne.
Indonesia will levy $50 on every tonne of CPO shipped at a zero export tax rate. When average prices drop below $750 a tonne, it cuts the monthly tax on exports to zero.
Indonesia has set the CPO export tax at zero since October 2014. The tax can rises to a maximum of 22.5 percent.
Indonesia hiked biodiesel subsidies and increased the minimum bio content in diesel fuel this year, which helps boost palm oil demand and reduce costly gasoline imports.
Biodiesel consumption this year is expected to be lower than targeted due to delay in implementing the new regulation. Consumption is expected at 3.5 million kilolitres in 2015, down from an initial target of 5.3 million, Mulyana said.
Before the recent changes, Indonesia's CPO production was seen rising 7 percent to 31.5 million tonnes, with exports falling 500,000 tonnes to 19.5 million, industry estimates show.
Major palm oil firms operating in Indonesia include PT Sinar Mas Agro Resources and Technology, Malaysia's Sime Darby and Singapore-based Wilmar International Ltd .
Indonesia also plans to reduce its CPO export tax to help offset the cost to companies of imposing the export levies, a senior Finance Ministry official has said. ($1 = 3.5700 ringgit)
07/05/2015 (Reuters) - Indonesian President Joko Widodo has signed a regulation requiring exporters to pay a levy of $50 per tonne of crude palm oil (CPO) and $30 for processed palm oil product shipments, officials said on Wednesday.
Indonesia is the world's top producer of the edible oil. The regulation, announced in late March, will fund recently announced biodiesel subsidies and could underpin palm prices if biodiesel demand picks up.
"The CPO supporting fund was signed by the president last night," Rida Mulyana, director general of renewable energy at the energy ministry, told reporters. "The threshhold for export tax is unchanged."
Chief Economic Minister Sofyan Djalil told reporters the levy would generate $750 million a year and be implemented in the fourth week of May.
In neighbouring Malaysia, plantations and commodities minister Douglas Uggah Embas said government and industry officials would advise on any policy response.
Ong Keng Wee, an analyst at Affin Hwang Capital Research, told Reuters the policy "over time ... will increase consumption and reduce stocks, and that will help prices."
Benchmark Malaysian palm oil futures climbed to their highest level in a month. The benchmark, which fell nearly 15 percent last year, closed on Wednesday at 2,183 ringgit ($611) per tonne.
Indonesia will levy $50 on every tonne of CPO shipped at a zero export tax rate. When average prices drop below $750 a tonne, it cuts the monthly tax on exports to zero.
Indonesia has set the CPO export tax at zero since October 2014. The tax can rises to a maximum of 22.5 percent.
Indonesia hiked biodiesel subsidies and increased the minimum bio content in diesel fuel this year, which helps boost palm oil demand and reduce costly gasoline imports.
Biodiesel consumption this year is expected to be lower than targeted due to delay in implementing the new regulation. Consumption is expected at 3.5 million kilolitres in 2015, down from an initial target of 5.3 million, Mulyana said.
Before the recent changes, Indonesia's CPO production was seen rising 7 percent to 31.5 million tonnes, with exports falling 500,000 tonnes to 19.5 million, industry estimates show.
Major palm oil firms operating in Indonesia include PT Sinar Mas Agro Resources and Technology, Malaysia's Sime Darby and Singapore-based Wilmar International Ltd .
Indonesia also plans to reduce its CPO export tax to help offset the cost to companies of imposing the export levies, a senior Finance Ministry official has said. ($1 = 3.5700 ringgit)