Indonesia raises export levy on crude palm oil to $180/mt effective Dec 10

Singapore — The Indonesian government has raised the export levy on crude palm oil to $180/mt from $55/mt earlier, with effect from Dec. 10, according to a finance ministry document seen by S&P Global Platts.

The move follows the rise in CPO export duty on Nov. 30. The export duty was raised to $33/mt from $3/mt, as the reference price on CPO exports in December was calculated higher at $870.77/mt.

The combined levy and duty on crude palm oil exports from Indonesia will now total $213/mt for December cargoes.

The market had been expecting the announcement with sellers pricing in a higher export levy of $120/mt as early as in November.

However, some had initially dismissed the move as premature in the absence of official confirmation. The market had largely been "paralyzed" by uncertainty around the levy.

"Without official news, sellers were quoting the levy at a wide range, from $80/mt to as high as $180/mt, but few were willing to pay up as they feared they would end up paying more than they had to," a Malaysia-based trader said.

Some sellers had just refused to quote for December cargoes at all, he added.

"The levy increase just confirms the expectation, it is not a game changer in reducing Indonesian CPO price competitiveness. But it will be a game changer for the Indonesian biodiesel funding pool by raising the prospect of B40 on the table again for 2021," Sathia Varqa, owner and co-founder of Singapore based Palm Oil Analytics, said.

Market reaction

"The Indonesian government finally revised the much talked about and highly anticipated palm oil export levies today. Although the levies are higher, it is mostly well priced in specially in BMD CPO futures. The future course of palm oil market trend would depend on fresh demand from key buyers India and China now," Anilkumar Bagani, head of research at Sunvin Group India, said.

Following news of the export levy, the benchmark February contract on the Bursa Malaysia rose to MR3,355/mt as of 5:19 pm Singapore time, up from the mid-day close level at MR 3,326/mt.

A ship broker said that tonnage in Asia had tightened quickly following the news.

"There were quite a number of promptly available vessels, which have suddenly gone on [subjects] for cargoes from Indonesia to Malaysia, as shippers tried to get the [crude palm] oil out as fast as they can. I am having trouble finding a vessel," said a source.

Another trader said that it was not a surprise, as "cargoes shipped out before Dec. 10 would attract a lot of savings."

A number of market participants were awaiting official data from the Malaysian Palm Oil Board on November Malaysian imports from Indonesia.

"The import volume is usually around 40,000-50,000 mt, but I have heard market chatter that this could be as high as 150,000 mt, mainly due to supply tightness in Malaysia," a market source said.

Another broker said: "Prompt availability is extremely tight and there are no vessels, but I feel that freight [rates] in the second-half of December will retreat now, as charterers will not be rushing to ship out in anticipation of the levy now that it has been announced."