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Malaysia to keep crude palm oil exports tax-free until end-Feb: govt official
[KUALA LUMPUR] Malaysia will keep exports of crude palm oil duty-free until end-February, a senior government official said on Friday, as the world's second-largest grower tries to boost demand and cut stockpiles that have ballooned to a 21-month high.
Tax-exempted exports for a sixth straight month may provide some relief to benchmark Malaysian palm prices that have tumbled 20 per cent this year on fears of record supplies of rival oilseeds and a rout in crude oil markets.
Sustained losses in palm, the world's most traded vegetable oil, could hurt earnings of major planters such as Sime Darby , Kuala Lumpur Kepong and Golden Agri , and threaten the livelihood of smallholders. "As a temporary move, the government has decided to exempt the 4.5 per cent export tax on crude palm oil from Sept. 1, 2014 to Feb. 28, 2015," Malaysia's plantation industries and commodities minister Douglas Uggah Embas said.
"The move is aimed at boosting crude palm oil exports and reducing stocks, which will then give a positive impact on local palm oil prices," he said at an industry event.
Some industry players and analysts had expected Malaysia to allow duty-free shipments until March to help prices pull away from five-year lows of 1,914 ringgit (S$725) per tonne hit in September. Prices are now at 2,150 ringgit.
Top palm grower Indonesia will announce its decision for January crude palm oil export taxes later this month. It had scrapped the levy from October to December.
Malaysia usually calculates its CPO tax using average monthly prices provided by the industry regulator the Malaysian Palm Oil Board, where a monthly average above 2,250 ringgit will trigger taxes that start from 4.5 per cent. But the final decision is taken by the government.
Inventories in Malaysia rose to 2.28 million tonnes at end-November, their largest since Feb. 2013, on sluggish overseas sales which led to supplies outstripping demand.
The tax incentive, however, could help spur demand for the tropical oil from palm's biggest consumers as it comes at a time where No.2 edible oil buyer China restocks ahead of its Lunar New Year festivities next year.