India’s CPO import duty cut will boost palm oil demand, says Maybank Kim Eng

KUALA LUMPUR, Nov 30 — India’s cut in crude palm oil (CPO) import duty to 27.5 per cent will make CPO more attractive as the commodity is set to regain some of the market shares it lost to sunflower and soybean oils this year, says Maybank Kim Eng.

It said most of the benefits will likely accrue to Indonesian origin as Malaysia’s CPO export duty exemption will expire on December 31, 2020.

“We believe the main beneficiary will be Indonesian CPO origin. It will likely regain a bigger market share at the expense of Malaysian CPO origin once Malaysia’s CPO export duty exemption ends on December 31, 2020.

“Recall that Malaysia’s government had exempted the export duty of CPO and CPKO (crude palm kernel oil) (between July and December 2020 after Covid-19 decimated demand at the onset of the pandemic,” it said.

Citing the Ministry of Plantation Industries and Commodities, Maybank Kim Eng said Malaysia’s government currently has no plans to extend the tax exemption beyond December 31, 2020.

The research firm said a quicker stockpile build-up will hasten the seasonal CPO price correction by mid-2021.

“The unintended consequence will be a quicker build-up in Malaysia’s MPOB stockpile in 2021 which the market tracks for price discovery,” it said today.

Come Jan 1, 2021, Maybank Kim Eng expects Malaysia’s CPO export to attract more or less eight per cent export duty (or about RM270 per tonne) assuming CPO price stays at RM3,430 per tonne (as at 26 Nov).

At the same price level, Indonesia’s CPO export duty will be just US$18 per tonne or RM75 a tonne.

Furthermore, the Malaysian growers have a general reluctance to pay CPO export duty in the past (i.e. not export CPO).

The research house said it is keeping its CPO average selling price forecast of RM2,500 per tonne for 2021.

The research house has upgraded the sector “call” to positive from “neutral” as the import duty reduction was effective November 27, 2020. — Bernama