Malaysia left the tax on crude palm oil exports unchanged for a third month in May as the world’s second-largest producer seeks to boost shipments and pare inventories. Futures tumbled to the lowest level this year.
Shipments will be taxed at 4.5 percent next month as the reference price was set at 2,347.26 ringgit ($772) a metric ton, within the minimum band for a levy to be applied, according to a Customs Department statement. The tariff was zero in January and February before being raised to 4.5 percent in March.
Futures plunged to the lowest level since Dec. 17 in Kuala Lumpur today as demand weakened for the oil used in everything from candy to biofuels. Crude palm oil exports dropped 66 percent to 138,562 tons in March from a month earlier after the tax was imposed for the first time this year, while shipments of processed oil jumped 41 percent to 1.4 million tons, according to data from the Malaysian Palm Oil Board.
“The authorities in Malaysia may think that this 4.5 percent is optimal in increasing exports, while at the same time it’s not setting the bar too low,” said Ker Chung Yang, an analyst at Phillip Futures Pte. in Singapore. “I don’t see this tax as a big boost or hindrance in lowering the stockpiles.”
Exports from Malaysia dropped 4 percent to 648,275 tons in the first 15 days of this month, surveyor Intertek said today.
Total palm oil exports increased 10 percent to 1.54 million tons in March, the first monthly gain in five, and inventories declined to a seven-month low of 2.17 million tons, the Malaysian Palm Oil Board said April 10. Reserves reached a record 2.63 million tons in December.
Malaysia said in October it would cut the export tax to between 4.5 percent and 8.5 percent from about 23 percent, to help trim record stockpiles and compete with Indonesia, the largest producer. Indonesia kept its export duty unchanged at 10.5 percent this month.
The contract for delivery in June dropped 2.2 percent to 2,294 ringgit a ton on Bursa Malaysia Derivatives, closing for the first time below the 2,300 ringgit level this year.