Malaysia palm oil exports to remain flat for rest of 2011, outlook for next year negative as refiners see price disadvantage after Indonesia cut export taxes; Indonesia refiners could see price advantage between US$72-US$129/ton

Andrew Rogers

LOS ANGELES , September 15, 2011 (Industry Intelligence) – Palm oil exports from Malaysia will remain flat at best for the rest of 2011, while the outlook for next year is negative as refiners are seeing a price disadvantage after Indonesia cut export taxes on refined palm olein, The Jakarta Globe reported Sept. 14.

The tax change in Indonesia beginning Sept. 15 would decrease production costs for the country’s refiners and lead to a possible price advantage between US$72 and $129 a ton, according to Mohammad Jaaffar Ahmad, chief executive officer of Plam Oil Refiners Association of Malaysia.

Malaysia does not place a tax on its processed palm oil exports, but its costs have increased because of tight crude palm oil supplies usually supplemented with imports from Indonesia.

Indonesia halved its taxes on refined palm oil and kept taxes on crude palm oil nearly unchanged, and more of the oil will go to the country’s plants, limiting the supply for Malaysia and increasing feedstock costs.

Malaysia has been on top of the refined palm oil market primarily focused on China for years, and refined palm oil shipments made up 70% of total exports at 16.6 million tons in 2010, according to data from the Malaysian Palm Oil Board.

Malaysia’s high export tax on crude palm oil would mean that refining capacity that stood at 22.9 million tons by the end of 2010 will not be shut down in the short term, Mohammed said.

Malaysia’s enforcement of its annual duty-free quota on palm oil exports that was set at 3.3 million tons this year for selected planters will put a strain on supply, which could make the situation in 2012 worse if the policy persists.

Refiners with smaller capacity could be forced to shut down, as they may not be able to operate at the capacity necessary to be profitable, said Mohammed.

The primary source of this article is The Jakarta Globe, Jakarta, Indonesia, on Sept. 14, 2011.

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