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Malaysia's 2021 crude palm oil exports to surge 24.4% on year: MPOC

Highlights

Indonesia's higher taxes making CPO exports costlier

Largest buyer India set to import 8 mil mt of CPO in 2021: analysts

New Delhi — Malaysia's crude palm oil (CPO) exports are expected to hit 5.5 million mt in 2021, soaring 24.4% from 2020 levels, as Malaysian CPO became more competitively priced after Indonesia revised its export duty structure, Malaysian Palm Oil Council CEO Wan Zawawi Wan Ismail said April 5.

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Speaking at a web-based seminar called POINTERS, Ismail said Malaysian CPO production was set for a moderate recovery in 2021, reaching 19.6 million mt from 19.14 million mt in 2020.

Malaysia is the second largest producer of palm oil in the world after Indonesia, and exports more than 17 million mt of palm oil a year. In 2020, it exported 12.95 million mt of processed palm oil (PPO) and 4.42 million mt of CPO.

Crude palm oil is naturally reddish in color and must be refined by palm oil millers to make PPO, used commonly for cooking purposes and food products.

Since December, Indonesia has initiated a progressive export levy system based on crude palm oil's market price to fund its internal biodiesel program. Currently, Indonesia charges an export duty of $116/mt along with $255/mt in export levy, which amounts to $371 on every metric ton of crude palm oil.

Meanwhile, Malaysia charges an 8% export tax on CPO, which amounts to $84/mt.

Indian imports set to rise

With Malaysia's palm oil stocks expected to see a slight decline in 2021 from 2020 levels, Indian traders remain more concerned about availability of stocks and are less worried of the price spread between Indonesian and Malaysian CPO prices, Anil Kumar Bagani, research head of Indian vegetable oil broking company Sunvin Group, told S&P Global Platts.

MPOC forecast the benchmark crude palm oil contract to average MR3,846/mt, ($928.43/mt), reaching a low of MR3,502/mt and a high of MR4,190/mt on the Bursa Malaysia exchange during the second quarter of 2021.

The industry body said prices are expected to remain firm for Q1 and Q2 on concerns of supply limitations due to heavy rains in January-February.

Platts assessed the crude palm oil contract, FOB Indonesia, at $1,050/mt, while the CFR West Coast India contract was assessed at $1,052.50/mt on April 1.

"While the price difference is an issue, as Malaysia has very tight palm oil stocks, mainly CPO, the sellers are not offering at discount, instead they are going for neck-to-neck to Indonesia pricing," Bagani said, adding that Malaysia- and Indonesia-origin CPO for India on a C&F basis was almost equal.

India is the world's largest palm oil importer and buys around 7 million-8 million mt of it every year to meet its domestic demand. Most of that demand is met by Indonesian suppliers.

However, Malaysian palm oil's share in India is expected to rise to 3 million mt in 2021, according to the MPOC.

In 2020, India imported 7.21 million mt of palm oil, of which 2.75 million mt was supplied by Malaysia.

"In 2020-21, India palm oil imports are expected to increase by 11% to 8 million mt, boosted by a gradual recovery in demand and lower inventories, which need to be replenished," Nirav Desai, managing partner at agricultural research company GGN Research, said in the seminar.

Bagani projected a similar import estimate of 8 million mt for 2021, of which 3 million-3.2 million mt could come from Malaysia.