KUALA LUMPUR:Malaysia aims to “harmonise” its palm oil export duty plan with the more competitive Indonesian levies in a bid to win global market share, a Malaysian minister said in first ever official remarks on what the country’s palm sector has long been seeking.
Malaysia has always trailed Indonesia as the world’s No.2 producer and exporter of palm oil mainly because of lower land and labour costs in its larger Southeast Asian neighbour.
This gap widened further after Indonesia in 2015 imposed levies on shipments that both improved downstream margins and increased its dominance of major markets like India and China.
Indonesian refined, bleached and deodorised crude palm olein has this year been selling at a discount of around $10 to average Malaysian prices, hurting refiners in Malaysia and prompting calls for a common export policy from them.
“I have suggested harmonizing the tax duty structure (to Indonesia)… It’s not good competing with one another. It’s a lose-lose situation to keep undercutting (one another),” Mah Siew Keong, Malaysia’s minister of plantation industries and commodities, told Reuters in an interview on Thursday.
“The market has changed. China used to be our biggest market, now it is number three,” said Mah, adding Malaysia needed to hunt for new markets and diversify.
Chinese imports of Malaysian palm plunged 49 percent in the first half of 2016 from a year ago to 0.6 million tonnes, while its purchases from Indonesia only fell 0.2 percent to 1.2 million tonnes.
Malaysia will look to win back market share in China and enter markets such as Africa, Korea and Japan, said Mah. The Malaysian Palm Oil Board is also working from Iran to target Central Asian countries, he said. Having more oleochemical plants built abroad would also add value to Malaysia’s downstream palm industry, said Mah.
“In Europe we are quite represented. In America, we have not gone there aggressively enough,” he added. Mah expects Malaysia’s palm oil output to climb to 20 million tonnes in 2017 if weather normalises for the rest of this year, recovering from a projected drop in 2016 due to the impact of dryness linked to an El Nino weather event. Analysts expect Malaysian palm oil output to slip to 19 million tonnes in 2016, from 19.96 million tonnes in 2015.
The drop in production this year will, however, not be as drastic as the 16 percent decline seen in the first half, said Mah, as output has picked up over July and August. Mah retained his palm price forecast of 2,500-2,600 ringgit per tonne for 2017. Benchmark prices are currently near a three-week low of 2,487 ringgit ($610.46).
($1 = 4.0740 ringgit)
