Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

In this list
Agriculture | Natural Gas | Oil

Indonesian palm market factoring $120/mt export levy into CPO offers

Electricity | Energy | Coking Coal | Thermal Coal | Electric Power | LNG | Oil | Crude Oil | Metals | Steel | Raw Materials | Petrochemicals | Tankers

Market Movers Asia, Nov 30-Dec 4: Markets await OPEC+ decision over oil production cut extension

Agriculture | Biofuels

Platts Biofuelscan

Electric Power | Renewables | LNG | Infrastructure Utilities

Caribbean Energy Conference, 21st


Germany awards coal closure compensation to 4.8 GW to shut 2021

Electric Power | Renewables | Natural Gas (North American) | Crude Oil | Steel | Petrochemicals

Commodity Tracker: 5 charts to watch this week

Indonesian palm market factoring $120/mt export levy into CPO offers


Levy yet to be formally announced by finance minister

Move expected to increase market volatility

Singapore — Sellers of Indonesian crude palm oil have started factoring in an export levy of $120/mt, though an official announcement has not yet been made, sources said Nov. 3.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

The local Indonesian PTP tender was also accepted at $791.97/mt for 1,500 mt, factoring in the higher export levy at $120/mt, according to broker reports.

"The progressive export levy model was announced last week by the Coordinating Minister of Economic Affairs, and has to be formally issued by the Minister of Finance. The the market is already acting upon it, and I think the final announcement is merely pending administrative approval" a source said.

Others said any action was premature in the absence of the official announcement.

CPO FOB Indonesia offers for November rose as high as $809/mt on the day with bids at $795/mt at 5 pm Singapore time, falling to as low as $795/mt at the end of trading hours. Around 1,000-2,000 mt of crude palm oil was sold for November at $795/mt. A seller offered Indonesian CPO for December at $792.50/mt, with offers seen as high as $802.50/mt at the end of trading hours.

That came after the export levy on Indonesian crude palm oil was raised to $55/mt in June. Consequently, the gloomy outlook for crude oil prices in 2021 spurred the government to consider the possibility of further raising the export levy to fund the country's biodiesel program.

Market participants had anticipated a further increase in the levy in October, but no news had been forthcoming. As a result, limited trades have been heard in the CPO FOB Indonesia market.

"Initially, some thought that the levy would be increased to around $80/mt and would be effective Oct. 1. When people started saying that the levy was around $120/mt, up from $80/mt, the futures on the Bursa Malaysia rose to factor in the higher levy, among other reasons," a source said.

On Oct. 28, there was talk that the export levy would surpass initial market expectations and the November contract on the Bursa Malaysia rose to a high of MR 3,333/mt in afternoon trading from a low of MR 3,160/mt, before closing at MR 3,218/mt. On Nov. 3, the January contract on the Bursa Malaysia opened gap higher tracking strength in the vegetable oil complex during Asian trading hours, but was likely also supported by decision of Indonesian sellers to price in the higher export levy.

"The market action on the news today seems overdone. Prices are likely to correct once the announcement is official, and also considering the narrow spread between palm oil and soybean oil prices, especially as the winter months approach," a trader said.

The palm market is also supported by tight fundamentals.

"Malaysian exports for Oct. 1-31 proved robust at 1.7 million mt and with production expected to be lower on the month, October end stocks could recede to below 1.6 million mt," said Anilkumar Bagani of Sunvin Group.

Another trader said the tight supply situation in the market was one of the reasons the sellers were able to price the levy into the offers in the absence of an official announcement.

According to Nagaraj Meda of Transgraph Consulting, the move is likely to increase volatility.

"The progressive levy model is imposed in tiers, and prices are likely to swing according to the tiers. For example, every $25/mt increase in the CPO price attracts a levy increase of $15/mt. Thus, when the levy moves to a higher or lower tier, CPO prices will move by around $25/mt. It is better to impose a system where the levy is a percentage of the CPO price and with only two slabs like below $500 and above that."