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.