Indonesia may see exports of palm oil products in July rise by one-third from May, despite an increase in export tax, as producers may be forced to sell their output to avoid a glut, traders said on Wednesday.
"Some producers may have to export because their production is rising while domestic consumption isn't much," said a trader in Medan, one of the leading ports for palm oil exports. "Exports should be at least 1 million tonnes, otherwise storage tanks will be full."
Palm oil production in Indonesia, the world's second-largest producer after Malaysia, normally starts to climb in June and reaches its peak in August-September during the rainy season. Higher supplies of palm oil, used in products ranging from candy and cosmetics to bifocal, may force Indonesian sellers to offer a higher discount than the 5 percent due to port congestion, traders said.
"There may be more selling pressure from Indonesia as they must get rid of their oils. It is possible that sellers may offer a discount of around 7.5 percent," the Medan trader said.
Indonesia expects its crude palm oil output to rise more than 9 percent to 17.4 million tonnes this year, with exports estimated at 13.2 million tonnes. Another trader in Medan estimated palm oil exports in June will slow to around 1 million tonnes due to firm crude palm oil prices and the higher export tax, but will pick up in July as crude palm oil prices stabilise.
"Exports in June are likely to slow down partly because of a spike in prices. But prices are stabilising now and that will attract buyers in July, particularly from China," he said.
Indonesia raised the export tax on crude palm oil to 6.5 percent from 1.5 percent while the tariff on crude olein was increased to 6.5 percent from 0.3 percent to stabilise prices, which have jumped about 30 percent this year on surging global prices.
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