Indonesia set to cut palm oil export tax

JAKARTA: Indonesia, the largest palm-oil producer, will probably reduce a tax on exports in November to the lowest level in two years after prices dropped 12% in the past month, an industry group said.

The duty for crude palm oil may be cut to 10.5% from 13.5% this month, said Susanto, head of marketing at the Indonesian Palm Oil Association. Base price may be reduced to US$785 a metric tonne from US$927, he said. That would be the lowest tax rate since November 2010 when it was set at 10%, according to data compiled by Bloomberg News. The Trade Ministry may announce the November rates next week.

Malaysia, the second-biggest producer, will cut its export duty and abolish a duty-free shipments quota from Jan. 1 to help the industry to compete with other exporting countries, the Ministry of Plantation Industries and Commodities said Oct 12. The oil, used in everything from candy to biofuel, has plunged 21 % this year in Kuala Lumpur. A global economic slowdown hurt demand amid a rise in production in Indonesia and Malaysia.

The lower tax “would be positive for Indonesian exports,” Susanto, who uses only a single name, said in a mobile-phone text message today. “Hopefully, shipments may exceed 1.5 million tonnes next month.”

Exports from Indonesia may drop 12 % to 1.4 million tonnes this month from September, according to the median of estimates from four plantation executives, a refiner and an analyst in a Bloomberg survey.

That would be the biggest drop since June when shipments fell 13%.

Futures traded 0.2% higher at RM2,501 ringgit (US$821) a tonne on the Malaysia Derivatives Exchange at 3:47 pm local time.

Prices are set to decline in the next six weeks to RM2,200 a tonne, the lowest level for a most-active contract since November 2009, Dorab Mistry, director at Godrej International Ltd, said Oct 16.

At that price palm will be competitive for use in biodiesel and energy demand will return, reducing stockpiles within three months, he said.