29/10/2024 (Oils & Fats International) - Higher export duties set to be introduced by leading palm oil producers Malaysia and Indonesia are expected to increase demand for the commodity, according to a report by The Star.

Effective from 1 November, Malaysian crude palm oil (CPO) prices of between RM3,601-RM3,750 (US$828-US$862)/tonne would be subject to an export duty rate of 8.5%. Prices ranging from RM3,751-RM3,900 (US$862-US$897) would be taxed at 9%; RM3,901-RM4,050 (US$897-US$931) at 9.5% and more than RM4,050 (US$931) at 10%, the 24 October report said.

The increase in Malaysia’s CPO export tax was to promote local downstream refining operations, according to Plantations and Commodities Minister Johari Abdul Ghani.

Speaking to StarBiz, CGS International Research analyst Jacquelyn Yow said the increase in Malaysia’s CPO export duty and the significant hike in Indonesia’s export duty and levy for November had prompted higher purchases.

“With the current CPO prices at about RM4,000 (US$920)/tonne level, the export duty would increase by about RM60 (US$14)/tonne compared to the previous duty structure,” she said.

In Indonesia, Yow said the combined CPO export duty and levy was expected to lead to an increase of US$54 (RM235)/tonne in November.

Lower-than-expected production in Indonesia had also supported a recent spike in CPO prices, Yow added.

Tight supply, alongside changing weather patterns and Indonesia’s transition to a B40 biofuel blending mandate, would keep CPO prices elevated, Council of Palm Oil Producing Countries (CPOPC) deputy secretary-general Nageeb Wahab said.

CPO prices of RM4,000-RM4,500 (US$920-US$1,034) will be a “new normal” for the industry, according to Wahab.

“We are not going to see higher palm oil production. Malaysia can only do about 20M tonnes annually, while Indonesia can do about 50M tonnes amid its stagnating yields,” he said.

“We anticipate CPO demand to grow 3%-5% annually, but production volume can’t catch up.”

With every 10% increase in Indonesia’s biofuel mandate increasing palm oil usage by 3M-4M tonnes, this would contribute to a shortage, according to Wahab, who was formerly the CEO of the Malaysian Palm Oil Association.

Indonesia, which currently has a 35% blending mandate, is looking to implement a 40% mandatory biodiesel mix.

Indonesia’s agriculture minister Andi Amran Sulaiman has said the government is working towards implementing B50 in the future.

CIMB Securities head of Malaysia research Ivy Ng Lee Fang was quoted as saying Indonesia’s B50 plan was contributing to higher CPO prices.

“Concerns over lower oilseeds supply with high oil content like rapeseed and sunflowerseed, as well as tight palm oil supply, as Indonesian production was affected by dry weather in 2023, have also contributed to the higher CPO prices,” she added.

Ng said she expected CPO prices to stay firm until the supply situation improved.

Together, Malaysia and Indonesia produce more than 80% of the world’s CPO supply.

https://www.ofimagazine.com/news/malaysia-and-indonesia-hiking-export-taxes