KUALA LUMPUR: Palm oil exports from Malaysia, which waived a levy on shipments for the final four months of 2014, will probably remain duty-free in January as average prices stay below a threshold for a tax to be imposed.
The duty, which is based on a price reference rate compiled by the palm board, will most likely continue at zero, according to CIMB Investment Bank Bhd, BNP Paribas SA and Phillip Futures Sdn Bhd. Futures on the Bursa Malaysia Derivatives averaged RM2, 204 (US$631) a metric tonne from November 10 to December 9, below the RM2,250 level that triggers the 4.5 per cent tax on sales from the world’s largest shipper after Indonesia.
Malaysia removed the duty for September and October and extended the waiver for two months to try to curb the buildup of reserves and support prices. While the government’s move helped spur a bull market, futures still lost 20 per cent this year as demand for the tropical oil used in food and biofuels fell amid a global glut and a slump in crude prices. A prolonged duty exemption may help cut inventories and spur buying, according to RHB Investment Bank Bhd.
“If the government wants to help to bring down the stocks and also try to create some kind of buying market for the consumer to import, I hope that it can maintain the tax at zero for February and March as well,” Donny Khor, deputy director of futures and options at RHB, said by phone on December 8.
The reference rate that’s used to determine whether the export tax is applied is based on average contracted free-on- board prices from the Malaysian Palm Oil Board. The rate for January is set to be released on December 15.
Benchmark futures on the Bursa Malaysia Derivatives ended at RM2,130 a tonne yesterday. Prices entered a bull market on November 3, climbing more than 20 per cent from the RM1,929 close on August 29. The commodity jumped 15 per cent in September, rose a further four per cent in October, then fell last month as crude oil prices tumbled on the global glut.
Palm oil shipments from Indonesia are also duty-free as the government kept its tax at zero for a third month in December, the Trade Ministry said on November 28. The country sets its tariff according to a formula based on average prices in Jakarta, Rotterdam and Kuala Lumpur. Crude shipments attract no tax if the average rate is US$750 or less over a four-week period.
Any extension of Malaysia’s tax exemption will help make the country’s palm oil competitive against Indonesia’s as well as against other edible oils, according to Franki Anthony Dass, executive vice president of the plantation division at Sime Darby Bhd, the biggest listed producer. It would help to ease Malaysian stockpiles, Dass said in a text message on December 8.
