Palm oil inventories in Indonesia will probably rise to almost 90 percent of capacity as exports from the largest grower drop after Malaysia set its tariff at zero and as China imposed more stringent rules on shipments.
Stockpiles may gain to 3.5 million metric tons in January from 3.25 million tons in December, according to the median of estimates from two plantation companies, a refiner and an analyst compiled by Bloomberg. Shipments may decline 0.6 percent to 1.54 million tons, while production is seen stable at 2.5 million tons, the medians of estimates from the same four respondents and a third plantation company showed.
Rising inventories would increase pressure on Indonesia to cut its export tax to compete with Malaysia. The second-largest producer set the tariff on shipments at zero this month to drain record reserves and the government has said the rate will be unchanged in February. Indonesia has about 4 million tons of storage capacity, according to Deputy Trade Minister Bayu Krisnamurthi. It doesn’t publish official data on inventories.
“If the government cuts the export tax, it will definitely help boost shipments because we’re still in oversupply in the short term,” Jeffrosenberg Tan, a Jakarta-based analyst at PT Sinarmas Sekuritas, said yesterday.
Attempts by Indonesian exporters to cut reserves are hampered by the zero tariff in Malaysia, causing inventories to stay high at about 3.5 million tons this month, Joko Supriyono, a director at PT Astra Agro Lestari, said by phone from Jakarta on Jan. 15. Supriyono is also secretary-general at the Indonesian Palm Oil Association.
Indonesia’s Trade Minister Gita Wirjawan said Jan. 11 that the government is considering a cut in its export tax and “ideally” the tariff should be zero too so it can compete with Malaysia. The palm oil association, known as Gapki, has asked the government to reduce the tax to avoid losing market share in countries such as India that typically buy more crude oil. The tax was set at 7.5 percent this month.
Shipments from Indonesia in January would be the lowest since October, when they reached 1.42 million tons, according to Gapki figures. Exports of palm and lauric oils surged 39 percent to 1.98 million tons in November from a month earlier, the highest level since at least January 2008, which is the earliest data available from the growers and refiners group.
Palm oil futures have tumbled into a bear market in Kuala Lumpur as inventories in Indonesia and Malaysia surged because of low demand amid an economic slowdown in China and Europe. Prices dropped 23 percent last year. The contract for April delivery fell 2.1 percent today to 2,378 ringgit ($789) a ton.
China’s tightening of checks on oils imports from Jan. 1 will also affect shipments as cargoes will need more time to pass customs, said Susanto, head of marketing at Gapki. Imports of palm by China, the biggest cooking oil user, may drop to 300,000 tons this month, less than half of those in December because of the new rules, according to the median of estimates from six traders and researchers in Bloomberg survey this week.