Indonesia, the world's top palm oil producer, will cap its export tax for the edible oil at 22.5 percent from 25 percent previously, a trade ministry official said on Thursday. The changes, which include setting the minimum for the export tax at 7.5 percent versus 1.5 pct previously, will take effect from October 1, the trade ministry official, who declined to be named, told Reuters.
The export tax cap on palm oil olein products (downstream), was cut to 13 percent from 25 percent, according to finance ministry documents, which set the implementation date on 30 days from August 15. "Some people did expect 22.5 percent so it is not enormously disappointing in that sense," said John Rachmat, a Singapore-based analyst at Royal Bank of Scotland. "From a commercial point of view, it is not too generous a reduction that the government offers.
"Longer-term the impact should be somewhat muted, and it's only in this particular one month until the end of September that it could play some role." At 0951 GMT, the benchmark November crude palm oil contract on Bursa Malaysia Derivatives traded at 2,988 Malaysian ringgit ($1,003) versus 3,036 ringgit at the close on Wednesday.
The previous export tax system, aimed at securing domestic supply and reducing volatility in cooking oil prices, allowed the government to impose tax rates from 1.5 to 25 percent. Trade ministry and industry officials met every month to decide the tax rate for the following month, using the average spot crude palm oil prices in Rotterdam in the preceding 30 days as a reference price.
Earlier this week, the trade ministry said it will maintain the export tax for crude palm oil for September at 15 percent. Palm oil investors holding on to Indonesian stocks ahead of possible changes to the country's export tax, could swamp a well-supplied market and further pressure prices already weakened by global economic fears, analysts and traders said earlier this week. On Thursday, the Indonesian Palm Oil Association (Gapki) cast doubt on what difference such a change would make to current flow distortions on the global market.
"October 1 - another month of people restraining from exporting out of Indonesia then," said Rachmat. "But if there is no QE3 for example, that would be very bearish on commodity prices, and so if the downward pressure on CPO prices should resume again, you would probably stand to lose a lot more than 2.5 percent if you wait until October." A speech on Friday by Federal Reserve Chairman Ben Bernanke looks set to be the main event of the week for all markets, as investors wait to see if he will talk about more stimulus for the faltering US economy.
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