Currency and tax factors key in Asian palm oil market
Currency and tax factors key in Asian palm oil market
KUALA LUMPUR (Reuters): Malaysia's palm oil market will be
dominated by the performance of the ringgit again this week,
while the Indonesian market is likely to see less business
because of an unpopular tax.
Traders in Asia's two main palm oil producing countries said
last week that there were insufficient factors to boost prices of
the commodity, other than speculation.
"The ringgit will continue to be the baton for our market in
the near-term; the more it falls, the more the chance for our
prices to go up," said a trader in Kuala Lumpur on Friday.
Indonesian traders said their market had been affected by the
government's imposition of an additional export tax on palm oil.
"We expect the trend to continue next week," said a trader in
Medan, north Sumatra, on Friday.
In Malaysia last week, the weakening of the ringgit to 3.85 to
the dollar on Friday from Thursday's 3.79, and a tender for 6,000
tons of palm olein by India, resulted in frantic buying of palm
oil.
The rally saw the benchmark March futures close 48 ringgit
higher at 1,985 ringgit ($515.58) a ton, just two ringgit off the
limit-up of 50 ringgit allowed in any single trading session of
the Malaysian market.
Traders, however, could not say if the momentum could be
retained this week, and whether the March contract would breach
the 2,000 ringgit psychological level.
India's State Trading Corporation also passed at its tender on
late Friday for the palm olein, meant for December/January
shipment.
"Unless the ringgit falls again, let's say to 3.9 or 4.0 (to a
dollar), it looks like a serious correction or profit-taking will
take place (in palm oil prices) Monday," said another trader in
Kuala Lumpur.
Indonesian traders said they expected a quiet market,
following the imposition of the new export tax.
Indonesia's Industry and Trade Minister Tungky Ariwibowo said
on Thursday that an additional export tax of between 28 and 30
percent would be levied from December 19 on palm oil producers
who failed to supply 80 percent of their output to the local
market.
The move was aimed at stabilizing domestic prices which have
risen sharply due to the fall of the rupiah against the U.S.
dollar, the minister said.
"Demand was usually high ahead of the Christmas celebrations,
but the imposition of taxes to discourage export and stabilize
domestic prices has made players rather reluctant to do business
this year," said an Indonesian trader.
Reacting to the unpopular tax, Indonesian palm olein closed at
2,350-2,400 rupiah/kg in Jakarta on Friday, after opening at
2,500 rupiah/kg.