SE Asian markets await Indonesia's CPO ban lift
SE Asian markets await Indonesia's CPO ban lift
KUALA LUMPUR (Agencies): Southeast Asia palm oil markets are braced to see if Indonesia will lift its export ban on crude palm oil on Wednesday as scheduled, traders said.
Indonesian Industry and Trade Minister Mohamad "Bob" Hasan said on Friday that he had signed a decree to revoke the ban and that it would be replaced by an export tax effective on April 22.
"The (Indonesian) news has little impact in the market, in terms of prices...traders have agreed to sell olein at 2,750 rupiah/kg before the ban is lifted," said a trader in Indonesia.
"But this latest twist for sure brings fresh hopes the government will keep its promises. The market will continue to be stable (this week) and everybody will be waiting for the D-day to come," the trader said.
Another trader in Malaysia said: "We hope that Indonesia will lift the ban as soon as possible so that palm oil exports can go on smoothly without much interruption."
"Everybody is waiting. But there are a number of issues which have yet to be answered...such as the tax structure and whether companies will be given an export quota in order to ensure domestic prices and supplies," said one trader in Jakarta.
Some trade sources said the export taxes would be 40 percent for crude palm oil, 38 percent for RBD palm oil and crude olein, 36 percent for RBD olein, 4 percent for RBD stearin and zero percent for palm kernel oil (PKO) and RBD palm kernel oil.
"We are still waiting for the finance minister's decree on the export taxes on the various palm oil products. Given our previous experiences, we expect such a ruling only on Tuesday (today)," a major exporter in Medan, North Sumatra, said yesterday.
He said the biggest worry among exporters was the strong lobby by a major CPO processor for having a lower tax rate for olein exported in drums than that in bulk (tank).
"If the government did set the export tax on olein in drum at 10 percentage points lower than that on olein in bulk, as proposed by the major exporter, this would affect olein supplies to the domestic market because processors and traders would prefer exporting olein," he added.
The exporter argued that the bigger profit margin to be gained from olein exported in drums would also affect the supply of drums for use in transporting cooking oil from Java to the eastern islands.
"According to our calculation, based on a free on board price of US$625 per ton, a 10 percentage point difference in tax on olein exported in drums will generate an additional profit margin of $22.50 per ton, compared to bulk olein," he said.
He added that olein exported in drums could also be transshipped in Kuala Lumpur for reexports in bulk to other destinations, thereby causing unfair competition to similar exports from Indonesia which paid higher export taxes.
"We strongly hope, therefore, that the government would not set a lower export tax on olein shipped in drums because whenever domestic olein prices increase we are surely the first to be blamed by the government," the North Sumatra exporter added.
Indonesia banned the export of crude palm oil indefinitely in January to stabilize domestic prices, which have soared because of the 70 percent fall in the value of the rupiah against the U.S. dollar since July.
Before the export ban, the ex-factory price of olein was around 4,000 rupiah per kg. After the ban it dropped to around 2,800 rupiah.
Indonesian major producers and the government reached an agreement the previous week that prices should stabilize at 2,750 rupiah/kg so that the ban could be lifted.
In Kuala Lumpur traders said they expected selling in Malaysia on the day of the lifting (of the Indonesian export ban), but thereafter the market would continue to be dominated by currencies and fundamentals," a trader in Kuala Lumpur said.
Aside from the Indonesian factor, regional traders said the underlying tone in Malaysia and Singapore this week was seen firm due to tight supplies.
"Supply is going to be tight in coming months owing to the dry weather, and the oil extraction rate is also lower," a trader in Kuala Lumpur said.
Some trade sources had projected Malaysia's output in April to fall between 10 to 15 percent from March's 598.612 tons.
"Nearby supplies are a little squeezed at the moment and prices are moving up. Technically the market is more bullish than the previous week," said one trader in Singapore.
Malaysia's benchmark third month, July futures closed on Friday at 2,253 ringgit a ton. "We can't predict the resistance level as the market is so volatile these days," a trader said.