- Indonesia has increased the export tax rate for CPO from
7.5% to 9% for the month of February. The country has also increased the export
tax rate for refined palm olein from 2% to 3%.
- The increase in the export tax rate is in line with the
improvement in palm oil prices. The Indonesian Government reviews the tax rates
monthly in accordance to prices in Jakarta, Kuala Lumpur and Rotterdam.
- It appears that the Indonesian Government has not
succumbed to pressure from GAPKI (Indonesian Palm Oil Association) to reduce
the export tax rate for CPO to zero.
- Recently, it was reported that GAPKI is seeking to reduce
the CPO export tax rate in response to Malaysia’s zero CPO export tax rate in
February.
- It also appears that the Indonesian Government has chosen
to assist the palm oil refiners instead of the upstream players in the
country.
- The reduction of the CPO export tax rate would have
resulted in higher cost of feedstock
for the Indonesian refiners.
- This would have reduced their cost competitiveness against the Malaysian palm oil refiners.
- Based on the current export tax rates, it looks like that
Malaysia would have the advantage of exporting palm oil in crude form.
- Also, the Indonesian palm oil refiners would have a cost
advantage of US$43.32/tonne or RM131/tonne against the Malaysian palm oil
refiners.
- However after factoring in the discount to spot prices
implemented by the refiners in Sabah, then the cost advantage of the Indonesian
palm oil refiners is smaller at RM31/tonne.
- We maintain a positive stance on the plantation sector. We
believe that CPO prices would improve underpinned by softening palm oil
production and favourable demand.
Source: AmeSecurities
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