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Indonesia to cut crude palm oil export levy to $175/mt: sources

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Indonesia to cut crude palm oil export levy to $175/mt: sources

Highlights

Decision likely to expedite Indonesian CPO exports

Move welcomed by market

Indonesia's finance ministry has announced that the maximum export levy on crude palm oil will be reduced to $175/mt when palm prices exceed $1,000/mt, sources told S&P Global Platts.

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While the implementation date has not been announced, sources are expecting the reduction to be effective by the end of the month. The export levy on CPO is currently $255/mt, and is used to fund the nation's biodiesel program.

The move has been welcomed by most market participants, who were expecting it.

"Indonesian CPO has lost out on market share to Malaysian CPO due to price competitiveness. This will help Indonesian CPO exports," a trader said, adding that the decision had been "imperative".

"Indonesia is entering seasonal high production in the second half of the year and the CPO needs to be exported," the trader said. "There is a limit on the amount of refined products which can be shipped."

A second trader said the decision would help to mitigate a potential supply overhang of palm olein. Indonesian refineries had ramped up capacity as it was cheaper to export palm oil derivatives, considering the inhibitive CPO export levy and the current duty of $183/mt, though the duty for July is expected to retreat to $116/mt.

"India placed palm olein imports on the restricted list last year, and we have looked toward China as the other significant destination for olein," the second trader said. "However, while Chinese buyers have been moderately active, the import margins are not favorable. Additionally, the hog herd is recovering and this could negatively affect olein imports."

The Indonesian Finance Ministry could not be reached for comment.