Indonesian CPO export ban seen to continue

Indonesian CPO export ban seen to continue

SINGAPORE (Dow Jones): Indonesia's ban on palm oil exports is set to continue after it received no mention in the announcement yesterday of its revised economic package, agreed with the International Monetary Fund, by Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita.

Indonesia had been widely expected to announce the lifting of the ban, imposed in late December to help curb rising food prices and alleviate food shortages, as part of its revised $43 billion assistance deal with the IMF.

But when asked by Dow Jones Newswires specifically about palm oil, Ginandjar declined to comment.

'The ban will last until the end of May,' commented a representative of a major international cargo surveyor. 'We're getting very strong signals it will continue into the second half of the year.'

The export ban is widely expected to be replaced by an export tax, with a possible quota attached. Predictions on what level of tax this might be have ranged between 40 percent and 60 percent.

'We've heard nothing from the government,' said an official with a cargo surveyor in Jakarta. 'Nobody knows, it's very confusing. It should be lifted, but the timing's a problem.'

'They're still working it out,' said an official from a foreign government agency in Jakarta. The official was more optimistic about a lifting of the ban, pointing to sometime between April 15 and April 30.

Originally slated to cease March 31, the Indonesian government announced in February that the ban would continue indefinitely until domestic market conditions allowed for its lifting.

The scope of the export ban was extended in early January to cover all palm oil products as the Indonesian government feared other palm oil products would find their way out of the country.

The ban has largely achieved its objective of curbing upward pressure on domestic prices, but it has is hurt profitability of Indonesian companies and has unsettled the international palm oil market. Indonesia is the second largest world palm oil producer after Malaysia.

Prices of refined, bleached and deodorized palm olein, or household cooking oil, in the domestic market jumped from about 2,500 rupiah a kilogram in late December to as high as 4,600 rupiah a kilogram Feb. 4. The product is now quoted at 2,800 to 3,000 rupiah a kilogram.

Should the ban be lifted, market participants are in little doubt that international palm oil prices will tumble as Indonesia's now sizeable inventory pours into the market.

'Oleochemical sources tell me Indonesia's stocks are at about 400,000 tons,' said a Kuala Lumpur based trader. 'Domestic consumption is around 200,000 tons a month, so they'll have some 200,000 tons to sell.'

The official from the foreign government agency commented that many people expect domestic refined, bleached and deodorized palm olein prices to double to around 6,000 rupiah a kilogram if the export ban is lifted, as producers switch sales to the export market causing a slide in domestic supplies.