Local Planters To Gain From Indonesia’s Export Levy Plans: Maybank
09/09/2024 (Business Today) - Indonesia is considering a reduction in export levies on crude palm oil (CPO) and palm derivatives, a move expected to positively impact regional planters. The proposal aims to enhance price competitiveness against rival vegetable oils by simplifying levies to a flat rate of 7.5% for CPO, 4.5% for RBD Palm Oil and RBD Palm Olein, and 3% for biodiesel. This follows recent relaxations in domestic market obligation (DMO) rules, which are anticipated to benefit exporters as well.
The new levy structure would likely provide better net CPO prices, potentially benefiting upstream and integrated players. However, the timing of the detailed announcement remains uncertain. The recent DMO policy adjustments, effective from August 14, 2024, also provide relief by lowering ceiling prices and reducing subsidy costs for exporters.
Indonesia plans to increase its biodiesel mandate to B40 from B35 starting January 2025, aiming to boost biodiesel consumption significantly. The CPO Fund, collected from export levies, currently exceeds IDR30 trillion, supporting this initiative.
For the short term, analysts maintain a NEUTRAL view on the sector, with BUY calls on SD Guthrie, Swk Oil Palms, Ta Ann, and Bumitama Agri. The sector’s outlook reflects both the potential benefits of the proposed levy changes and the ongoing adjustments in domestic policies.