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Indonesia Increasing Palm Oil Export Tax Seen Curbing Shipments

Indonesia will raise taxes on palm oil exports in February in the first increase in nine months, potentially curbing shipments from the largest producer as rival Malaysia maintains a zero-tariff policy for a second month.

The duty will be raised to 9 percent from 7.5 percent in January, according to a Trade Ministry decree on its website today. The base price to calculate the levy will be increased to $744 a metric ton from $709, it said. This is the first increase in taxes since May, according to data compiled by Bloomberg.

The increased tariffs by Indonesia may lower shipments and hamper efforts to trim reserves, which have surged to about 90 percent of storage capacity. Futures in Kuala Lumpur have tumbled 21 percent after Malaysian inventories reached a record of 2.63 million tons in December, prompting the government to cut export taxes. The Malaysian tariffs were cut to zero for this month and will be kept at that level in February.

“Higher taxes will reduce our competitiveness against Malaysia,” Hariyanto Wijaya, a Jakarta-based analyst at PT Mandiri Sekuritas, said by phone. “Our biggest loss will be in our largest market, India, where crude palm oil imports will be taxed 2.5 percent. But Malaysian shippers won’t have to pay export tax for their shipments, that’s an advantage for them.”

India, the world’s biggest palm oil buyer, raised taxes on imports of crude cooking oils to 2.5 percent from zero on Jan. 17 to shield domestic oilseed growers from cheap overseas supplies. It also almost doubled the taxable value to $802 a ton for crude palm oil from $447 with the rate set to be revised every fortnight.

The Indonesian government reviews the tax rates and base export prices every month, based on average rates in Kuala Lumpur, Rotterdam and Jakarta in one month to the 19th of every month. The tax will be set at 9 percent if price falls in the range of between $800 to $850, according to a separate Finance Ministry decree. The February tax was based on reference price of $815.12 per ton, the trade ministry said.

Palm oil for delivery in April fell 1.5 percent to 2,445 ringgit ($793) a ton on the Malaysia Derivatives Exchange on Jan. 25. The market is closed today for a holiday.

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