- Last week, developments in the plantation sector were in respect of Dorab Mistry’s speech at Globoil India 2013, import tax for refined palm oil in India and palm oil shipment figures for September 1-25.

- Dorab Mistry was unexcited over CPO prices. He forecast CPO prices to be range-bound between RM2,200/tonne and RM2,400/tonne in the coming few weeks. He also opined that CPO prices could fall to RM2,000/tonne in January 2014 due to the bumper soybean harvest in Brazil and Argentina.

- The India Government will be making a decision on import tax rate for refined palm oil this week.

- Last week, it was reported that there have been proposals to increase the import tax rate for refined palm oil in India. The tax differential between crude and refined palm oil should be 10 percentage points instead of five currently.

- Due to the small difference between the import tax rates for refined and crude palm oil, buyers in India have preferred to purchase refined palm oil from Malaysia and Indonesia at the expense of the refiners in India. Large palm refiners in India like Wilmar Adani and Ruchi Soya Industries are reported to be operating at only 30% of their capacity.

- Presently, the import tax rates are 7.5% for refined palm oil and 2.5% for crude. The chief executive officer of Wilmar Adani said that India should increase the import tax rate for refined palm oil to 12.5% from 7.5%.

- If India were to increase the import tax for refined palm oil, then we reckon that companies in Malaysia would export more crude palm oil instead of refined. There is risk that the local refiners would be slightly affected by the increase in the import tax rate of refined palm oil in India.

- Comparing the export tax rate of 4.5% on CPO with the discount imposed by refiners in Sabah, it is cheaper for upstream players in Malaysia to export overseas than to sell to the local refineries.

- Finally, independent cargo surveyors reported that palm oil shipments from Malaysia rose by 6.4% to 6.5% in the 25 days of September compared with the same period in August. Shipments to USA and India climbed by 123.2% and 79.1% respectively, which more than compensated for a 22.4% fall in shipments to China.

Source: AmeSecurities