Indonesia May Revive Palm Oil Export Levy – Oil World

Malaysia announced it plans to reintroduce an export tax of 4.5% on crude palm oil exports in April, as an atmosphere of decreasing demand has caused futures to fall by 5% in Kuala Lumpur. Meanwhile, Oil World cautions that Indonesia, the world’s largest producer and exporter, may follow suit and revive an export tax of its own.

Currently Indonesia’s export tax on crude palm oil kicks in if prices rise above $750 per ton, however recent prices have fallen well below this threshold to $660 per ton. The implementation of the revived tax will likely happen through the lowering of the benchmark price for taxation.

Since last September when Malaysia eliminated its export tax on crude palm oil, exports increased 21%, but in response, exports of processed palm oil fell by 15% in favor of crude exports. Indonesia’s reimplementation of its tax would thwart Malaysia from pulling ahead in processed exports, keeping the two countries on a ‘level playing field.’

Oil World goes on to warn that soyoil prices, falling on the weakening energy markets, will likely underperform in the March to June period, narrowing palm oil’s price premium to soyoil even further.

Although it is true that Indonesia’s government is signaling it will increase its biofuel blending requirement from 10% to 15% in an attempt to support palm oil prices, the industry in general is discounting this news based on Indonesia’s historical lack of enforcement on its existing biofuel targets.