Asia palm oil plays waiting game over tax

Asia palm oil plays waiting game over tax

KUALA LUMPUR (Reuters): Malaysia is likely to include the four firms allowed last year to export crude palm oil duty-free in this year's concession, while Indonesia may cut the CPO tax to five percent from 10 percent soon, traders said Monday.

Last year, the government authorized plantation house Felda, Kuala Lumpur Kepong Bhd, Golden Hope Plantations Bhd and Kuok Oils and Grains to export CPO without duty in order to help reduce stocks.

Trade sources said the four firms would once again receive the concession plus another four companies from the eastern states of Sabah and Sarawak on Borneo island. Government officials could not be reached for comment on Monday.

"As far as I know four companies have been confirmed. The government plans to allow eight companies to export CPO duty-free this year, but we don't know yet about the other four," said one trader in Kuala Lumpur.

Officials at the four companies declined comment.

Market sources said that Malaysia and Indonesia appeared to be waiting for the other to make a decision before making their own announcement.

An official at Indonesia's Trade and Industry Ministry said on Monday the country would decide its new export taxes on CPO and its by-products on Thursday. The taxes would be announced early in September, said the official.

The official options included cutting CPO export tax to five percent and eliminate export tax on by-product. Another option was to axe all export taxes on CPO and by-products.

Traders said they expected Indonesia to adopt the first option to take a more cautious approach and see what Malaysia does.

Malaysia's Primary Industries Minister Lim Keng Yaik said earlier in August that priority in awarding the tax breaks would be given to exporters in Sabah and Sarawak and that the number of firms could be higher than four.

Traders earlier expected the government to release the list after a cabinet meeting last Wednesday, but Lim said the government could make a decision this week.

The next cabinet meeting will be on Wednesday. Traders, however, were skeptical there would be an announcement because the government would be too busy preparing for the Independence Day celebration on Thursday.

Traders said the duty-free concession could help reduce stocks, which are piling up due to slack demand from traditional costumers, such as India.

Buyers are aware the stocks were high in Malaysia, so they don't have to rush to buy.

Malaysia has for many years taxed CPO exports heavily, currently the levy is about 140 ringgit a ton, to ensure supply to the local refining industry. Exports have been falling.

The benchmark third-month November futures contract was unchanged at 1,000 ringgit ($263.15) a ton at 0820 GMT.