By Hanim Adnan & Zunaira. The Star
PETALING JAYA: The newly imposed export duty exemption on crude palm oil (CPO) for September and October will have a positive impact on the local upstream plantation players, but will be negative for palm oil refiners in the short term.
CIMB Research, in its latest report, said the move to cut export tax in September to zero would allow local CPO exporters to save about RM106 per tonne in export tax value [RM2,348.8 per tonne (the CPO reference price) x 4.5% export tax].
The CPO export duty for September had been earlier gazetted at 4.5%.
CIMB Research said the export tax exemption would help boost CPO exports from Malaysia in the near term, as “it would be more competitive against Indonesian CPO, which is subject to a 9% CPO export tax for September”.
On the other hand, the impact would be negative for Malaysian refiners, as “they would become less competitive against the Indonesian refiners for the rest of September”, said the research unit.
Following this, the export tax differential between refined, bleached and deodorised palm oil (refined products) and CPO will be zero in Malaysia against 9% for the Indonesian refiners.
“However, the CPO tax advantage against Indonesia may not last as we head into October, as there is a likelihood that Indonesia would also adjust its CPO export tax down to zero if CPO prices stay at current levels and average below US$750 per tonne,” added CIMB Research.
“Overall, we view this measure as positive in the short term, as it would encourage CPO exports from Malaysia, which have been weak over the past few months,” said the research unit.
However, this may not be able to significantly lift CPO prices, which have fallen to a five-year low due to concerns over rising oilseeds and edible oil supply in the global market due to favourable weather conditions.
“Pure upstream palm oil players in Malaysia may benefit the most from this measure in the near term, while planters with significant downstream operations in Malaysia may be dented by this move in the near term,” said CIMB Research.
When contacted by StarBiz, the Palm Oil Refiners Association of Malaysia (Poram) said the association had not been consulted on the latest CPO export duty exemption.
“Poram has no further comments, as the CPO export duty structure (introduced in January 2013) had already been implemented by the Customs Department.
“A majority of our members are supportive of the CPO export duty structure and would like the Government to continue implementing them. Our position has not changed.”
Industry expert M.R. Chandran pointed out that the two-month tax exemption for CPO export would provide a short-term relief for local exporters.
“Palm oil exporters are getting a temporary breather that will help to stem the rising palm oil stocks and mitigate further drops in the CPO prices.”
Chandran said the Government’s move would encourage additional exports of CPO, amounting to 300,000 tonnes per month for the next two months.
“This will lower the current inventory and help to push the CPO prices upward.
“Coupled with this, the Government has also announced that Malaysia would boost its bio-diesel blending programme to 7% from 5% effective this December,” he added.
On the other hand, Chandran expects Indonesia’s counter-reaction to also have an impact on the local palm oil industry.
UOBKayHian, in its latest report, described the CPO export duty exemption as positive and that the supportive measure from the Government came earlier than expected.
“The move to prevent further declines in CPO prices should see CPO recovering to above RM2,000 per tonne,” the research unit said, adding that “however, it is unlikely to bring the CPO price on par with the first-quarter 2014 range of RM2,500 to RM2,800 per tonne due to concerns of large supplies of oilseeds coming into the market from the United States.”
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