Indonesia may reduce palm tax to zero
Publish date: Fri, 11 Jan 2013, 04:50 PM
Indonesia, the world's largest palm oil producer, is considering reducing export taxes to boost competition with Malaysia, which set its tariff for the crude variety at zero this month to help clear record stockpiles.
"Ideally it should be at zero too," Trade Minister Gita Wirjawan told reporters in Jakarta today. The possible reduction "can be at any level, as long as it can help maintaining the downstream-industry development and our competitiveness," he said, referring to processors and refiners.
Enhanced competition from Indonesia for overseas sales of the most-used cooking oil may erode Malaysian exports, deepening a bear market in crude palm oil in Kuala Lumpur. Malaysia's reserves gained to the highest ever last month, data showed yesterday, and surveyors said exports fell in the first 10 days of January. The two countries account for 87 per cent of global shipments, according to U.S. Department of Agriculture figures.
The ministry has held talks the industry minister on the tax issue, Wirjawan said. The Indonesian Palm Oil Association, known as Gapki, has asked the government to cut the tax to avoid losing market share in countries such as India that typically buy more crude oil, Secretary-General Joko Supriyono said Jan. 8.
The Malaysian government said in October it would cut its export tax to 4.5 per cent to 8.5 per cent, from 23 per cent, from Jan. 1, to help reduce the reserves. The tariff this month was set at zero as the base price was below the RM2,250 (US$745) threshold that triggers the 4.5 per cent rate. Indonesia cut taxes in 2011, making local crude palm cheaper than in Malaysia. The Indonesian rate is set at 7.5 per cent this month.
Declining Prices
Palm oil on the Malaysia Derivatives Exchange, the regional benchmark, declined as much as 2.3 per cent to RM2,332 a ton, the cheapest since Dec. 21, and traded at RM2,337 at 3:32 p.m. in Kuala Lumpur. Most-active prices have dropped 27 per cent over the past year.
Shipments of palm and lauric oils from Indonesia surged 39 per cent to 1.98 million tons in November from a month ago, according to data from Gapki today. The November figure is the highest since at least January 2008, the earliest data available from the growers and refiners group. It was also higher than the 1.6 million tons estimated in a Bloomberg survey.
Exports of palm oil and its by-products represented about 92 per cent of total shipments, or 1.83 million tons, according to the data. Shipments in the first eleven months of 2012 rose 3.2 per cent to 16.3 million tons, the data showed.
Shipments from Indonesia may rise to a record 20 million tons this year, from an estimated 18.2 million tons last year, Gapki said on Jan. 8. Output may expand 5.7 per cent to 28 million tons, it said then.
Reserves in Malaysia expanded 2.4 per cent to an all-time high of 2.63 million tons last month, according to the figures from the country's palm oil board yesterday. That exceeded the median estimate for a decline in holdings to 2.53 million tons, according to a separate Bloomberg survey. -- Bloomberg
"Ideally it should be at zero too," Trade Minister Gita Wirjawan told reporters in Jakarta today. The possible reduction "can be at any level, as long as it can help maintaining the downstream-industry development and our competitiveness," he said, referring to processors and refiners.
Enhanced competition from Indonesia for overseas sales of the most-used cooking oil may erode Malaysian exports, deepening a bear market in crude palm oil in Kuala Lumpur. Malaysia's reserves gained to the highest ever last month, data showed yesterday, and surveyors said exports fell in the first 10 days of January. The two countries account for 87 per cent of global shipments, according to U.S. Department of Agriculture figures.
The ministry has held talks the industry minister on the tax issue, Wirjawan said. The Indonesian Palm Oil Association, known as Gapki, has asked the government to cut the tax to avoid losing market share in countries such as India that typically buy more crude oil, Secretary-General Joko Supriyono said Jan. 8.
The Malaysian government said in October it would cut its export tax to 4.5 per cent to 8.5 per cent, from 23 per cent, from Jan. 1, to help reduce the reserves. The tariff this month was set at zero as the base price was below the RM2,250 (US$745) threshold that triggers the 4.5 per cent rate. Indonesia cut taxes in 2011, making local crude palm cheaper than in Malaysia. The Indonesian rate is set at 7.5 per cent this month.
Declining Prices
Palm oil on the Malaysia Derivatives Exchange, the regional benchmark, declined as much as 2.3 per cent to RM2,332 a ton, the cheapest since Dec. 21, and traded at RM2,337 at 3:32 p.m. in Kuala Lumpur. Most-active prices have dropped 27 per cent over the past year.
Shipments of palm and lauric oils from Indonesia surged 39 per cent to 1.98 million tons in November from a month ago, according to data from Gapki today. The November figure is the highest since at least January 2008, the earliest data available from the growers and refiners group. It was also higher than the 1.6 million tons estimated in a Bloomberg survey.
Exports of palm oil and its by-products represented about 92 per cent of total shipments, or 1.83 million tons, according to the data. Shipments in the first eleven months of 2012 rose 3.2 per cent to 16.3 million tons, the data showed.
Shipments from Indonesia may rise to a record 20 million tons this year, from an estimated 18.2 million tons last year, Gapki said on Jan. 8. Output may expand 5.7 per cent to 28 million tons, it said then.
Reserves in Malaysia expanded 2.4 per cent to an all-time high of 2.63 million tons last month, according to the figures from the country's palm oil board yesterday. That exceeded the median estimate for a decline in holdings to 2.53 million tons, according to a separate Bloomberg survey. -- Bloomberg
Discussions
Be the first to like this. Showing 10 of 10 comments
should consider operating as cartel both Indonesia & Malaysia. Possibly rope in Thailand and India! What is there to lose if the CPO price keeps plunging and everyone loses! Ada baca ka, Encik Dompok?
on investor front, FGV and plantation counters will seriously be in trouble if not abated!
2013-01-11 18:02
yes, the palm oil cartel producer should be fully support. Like OPEC and
rubber exporter country. Beside of that, western investor has continues
pressure on cpo price to go downward. It is for their own profit, both
on trading purposes and underlying commodity price uptick. For example,
investor in CME use complicated derivative trading strategy. Sometime
they short soft commodity and buy hard commodity or between same group
of commodity. It is done also on Liffe, ICE or other exchanges. For CPO
trading, they short it and long mini soyoil or other. They use option
or extreme futures to ruin the palm oil price. In short, they do not
want cpo price to go up and keep discount with other grain and oilseed
price as large as possible. So palm oil exporter should keep stock as
like crude oil, release when price overheating. Use cpo for domestic
consumption like biofuel etc. Why UK And European listed plantation stock operates in Kalimantan still have bull run price? Because their
shareholder know how potential on cpo use are.
2013-01-11 21:12
You cannot keep palm oil stocks long time like crude oil. Palm oil is an edible oil and will degrade/oxidize if kept too long becoming rancid and unsuitable for human consumption. Like food, palm oil has expiry date, crude oil does not.
If the stock builds up too much, most planters will opt to sell cheap rather than losing all their stocks due to quality degradation.
Also you cannot keep the fruits on the tree unharvested until you have good price, otherwise the fruits will be rotten as well. For oil, you just have to switch off the pump....
2013-01-12 16:00
Cartel... meant to keep the price reasonably steady. not keeping the fruit! :)
car·tel
/kärˈtel/
Noun
An association of manufacturers or suppliers that maintains prices at a high level and restricts competition.
A coalition or cooperative arrangement between political parties to promote a mutual interest.
2013-01-12 16:02
Jumbo like to see KClow so scared....using other ppl tactic...and line to fend off attacks...
2013-01-12 16:22
If too much fruit on the trees, then how to keep the price steady? Ask them to throw away the fruit ah? :P
If too much supply, sure someone is gonna sell cheap. You can only maintain price if you restrict supply. Or you buy up all the excess supply.
Many many fruit coming out oh... at least 50-100K ha of plantation maturing each year...
Malaysia tried to corner the tin market in 80's end up horrible losses and lost position.
2013-01-12 17:17
read the second part, maybe can glean something! need to work together to reduce somehow? definitely the current output is killing everyone! :p
A coalition or cooperative arrangement between political parties to promote a mutual interest.
2013-01-12 17:19
Jumbo see KClow got kicked out from Scomi forum by his own ppl.....no face given....good one to you too Rambo and Dance222...let see if he incite politics further and he says!
jumbo laughing hard!
2013-01-12 17:23
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KC Loh
expected indonesia to respond in such a way! all out from them!
hope they piss off enough FTA members! :)
http://biz.thestar.com.my/news/story.asp?file=/2013/1/11/business/20130111152141&sec=business
2013-01-11 17:55