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.