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Malaysia suspends palm oil export tax for three months

January 11, 2018

Malaysia lifted its export tax on crude palm oil (CPO) on 8 January for a period of three months in an attempt to boost exports and prices, as well as reduce its growing stockpiles.

, Malaysia suspends palm oil export tax for three months

The country’s Minister of Plantation Industries and Commodities Datuk Seri Mah Siew Keong said at a press conference that the export tax suspension would be lifted before the end of the three-month deadline if CPO stocks fell to 1.6M tonnes, Reuters wrote on 5 January.

However, Mah expected Malaysia stocks to continue to grow in 2018.

“This scheme is one of the short-term preemptive measures by the government to manage the fall in CPO prices so that smallholders’ incomes are not impacted and the country’s oil palm industry continues to be competitive,” he said.

According to a Reuters poll, Malaysia’s CPO stocks grew 16% to 2.56M tonnes in November 2017 and were expected to climb to 2.69M tonnes by the end of December, the highest they had been in two years.

CPO prices plummeted 20% in 2017, but the tax suspension was expected to lead to a boost in demand from foreign buyers in January, which could raise prices with it.

“With this development, we expect a 30-50% increase in the export volume to major importing countries like India, Pakistan, China and Europe,” Malaysian agri trader Felda Global Ventures’ president and CEO Zakaria Arshad said.

However, Reuters quoted another unnamed Kuala Lumpur-based trader as urging caution as the impact of the tax suspension could be absorbed by the strengthening Malaysian ringgit, which in turn could lead to importers turning to soyabean oil instead of CPO.

“The recent strengthening of the ringgit may negate some of the effects, as well as the narrowing gap between palm oil and soya oil. The overall trend is that stocks are high and we haven’t seen production declining at a higher magnitude yet,” the trader said.

Malaysia’s palm oil production was expected to further increase in 2018, growing past the 20M tonne mark from 2017’s 19.5M tonnes, Reuters reported on 9 January.


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