Malaysian Feb CPO export tax raised to 6% from Jan's 5%

Singapore — The Malaysian government Friday raised the tax on crude palm oil exports in February to 6% from 5% in January.

The tax was raised after the reference price for Malaysian palm oil in February was calculated at RM2,907.63/mt ($717.13/mt), up from RM2,571.16/mt in January.

The news was expected by a number of market participants who said rising CPO prices would have spurred the government to raise the export tax in line with the recommended tax bracket.

"The increase in the Malaysian palm oil export tax is within expectations given the rise in palm oil prices over the last month, the export tax in the corresponding tax bracket was applied " head of research at Mumbai-based consultancy Sunvin Group Anilkumar Bagani said.

Though CPO prices have largely been bullish since October 2019, the Indian government's recent decision to restrict refined palm oil and palm olein imports has exerted downward pressure on the market. Additionally, a number of market participants who had previously been bullish on soybean oil and ultimately, palm oil, have also reconsidered their position. "We thought that China would resume purchases of soya beans, but the true value of how much they will actually purchase remains unclear.

"Many in the market have held long positions since the end of last year. Now, we are beginning to see people close out their positions as the rosy outlook for palm oil is beginning to dim a little. In addition to restricting refined palm oil and palm olein imports, we have also heard that the Indian government has warned buyers to stay away from Malaysian palm oil," a Singapore-based trader said added that the market "needs to find a strong support at MR 2,800/mt and hold above this level to maintain the long-term bullish outlook."

The benchmark April contract closed Friday trading on the Bursa Malaysia Derivatives Exchange at MR2,843/mt, down from a high of MR3,110/mt on January 10.

"We are heading toward times of uncertainty, with a possibly negative view on Malaysian crude palm oil. Regarding the agreement between the US and China, CPO prices will gain only in the short term on the back of elevated soya bean demand. However, if China imports more soya beans, this will result in more soya bean oil produced locally, ultimately negating demand for palm olein in China," a Malaysia-based market participant said.