Malaysia will allow crude palm oil exports at zero duty in January as the world’s second-largest producer seeks to reduce record stockpiles that drove prices to a three-year low last week.
The average price for calculating tax on shipments was set at 2,147.81 ringgit ($702) a metric ton for January, the customs department said in a notification today. That’s below the minimum threshold of 2,250 ringgit a ton for tax to be applied, it said.
Palm oil, used in everything from instant noodles to soap bars, slumped to 2,217 ringgit a ton on Dec. 13, the lowest price since November 2009, as output in Indonesia and Malaysia, the biggest producers, outpaced demand from China and India. Malaysia announced a cut in taxes and abolition of a duty-free export quota in October after inventories surged. The new tax rates will range from 4.5 percent to 8.5 percent, rising as prices climb from 2,250 ringgit a ton. The existing levy is 23 percent, according to the government.
“Export demand will pick up gradually in the coming days, and may ease stockpiles a bit,” Chung Yang Ker, an analyst at Phillip Futures Pte., said by phone from Singapore. “The current price level is too low for producers.”
The contract for delivery in February, the most-active by open interest, gained 0.2 percent to close at 2,280 ringgit a ton on the Malaysia Derivatives Exchange in Kuala Lumpur. Futures lost 1 percent last week for a fourth weekly decline and are heading for a 28 percent drop this year, the worst annual loss since the financial crisis in 2008.
Exporters may take advantage of zero duty to ship as much palm oil as possible in January, gradually reducing stockpiles and boosting prices,Ong Chee Ting and Chai Li Shin, analysts at Maybank Investment Bank Bhd., wrote in a report on Dec. 11. Indonesia’s last year changed export taxes to make local crude palm oil cheaper than in Malaysia, cutting cost for refiners.
Stockpiles in Malaysia climbed 2.3 percent, a fifth monthly gain, to an all-time high of 2.56 million tons in November from a month earlier, the nation’s palm oil board said Dec. 10. Inventories may climb to at least 2.7 million tons by Jan. 1, Dorab Mistry, a director at Godrej International Ltd., said on Nov. 30.
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