‘Levy on CPO, processed palm oil a short term negative’
KUCHING: Analysts peg the move by Indonesian President Joko Widodo to regulate exporters to pay a levy on crude palm oil (CPO) and processed palm oil product shipments as short term negative for Malaysian planters with operations in Indonesia, more so those which has yet to set up refining and oleochemical plants.
To note, the levy of US$50 per tonne of crude palm oil (CPO) and US$30 for processed palm oil product shipments which is expected to be put in place by late-May.
Researchers with Maybank Investment Bank Bhd (Maybank IB Research) said once implemented, this new export levy is short term negative for the purer upstream players with operations in Indonesia as it will shave off US$50 per tonne from the planters’ top line for every tonne of CPO they produce.
“Our recent channel checks with industry players suggest that upstream planters have started to receive lower CPO proceeds from traders/downstream players since this export levy proposal were first put forward in early-April 2015,” it highlighted in its note.
“Integrated players will be less affected relative to the purer upstream players as the export tax levy differentials will help boost downstream margins.”
Our recent channel checks with industry players suggest that upstream planters have started to receive lower CPO proceeds from traders/downstream players since this export levy proposal were first put forward in early-April 2015.
Maybank IB Research
Nonetheless, Maybank IB Research believed the government’s ultimate aim was not to “punish” upstream planters but to boost Indonesia’s domestic biodiesel consumption to 4.8 million metric tonnes over time, to reduce stockpile and ultimately to boost CPO price.
“We believe the recent stock price correction in Indonesia may have largely priced in this new export levy.
“Over the medium term, we believe Indonesia’s ambitious B15 programme could be positive for CPO price if well implemented. But thus far, Indonesia’s execution track record has been poor.”