KUALA LUMPUR: Malaysia announced on Friday it would fully exempt palm oil from export duty this year, in a move that traders estimated could boost shipments of the edible oil by 1 million tonnes in the second half of year.
Prime Minister Muhyiddin Yassin announced the exemption as part of an economic stimulus package to revitalise industries badly hit by the coronavirus pandemic.
Exports of crude palm oil, crude palm kernel oil and processed palm kernel oil will all be exempt from duties from July through to December.
The world's second largest producer and exporter of the edible oil had already lowered its export duty in crude palm oil to 0% for June only. "This will definitely help us further increase Malaysia's palm oil exports, especially to India," Malaysian Palm Oil Board chairman Ahmad Jazlan Yaakub said in a statement.
The duty exemption gives Malaysian crude palm oil a price advantage over Indonesian crude palm oil, and could increase exports by an additional 1 million tonnes, said Sathia Varqa owner and co-founder of Singapore-based Palm Oil Analytics.
"This means we should be able to do 16.953 million tonnes in exports this year, but it is still 8% lower than 2019," Varqa told Reuters.
Factoring in the removal of the duty, Malaysian crude palm oil is about $15 cheaper than rival Indonesia, which this month raised its export levy by $5 to $55 per tonne to raise funds for a domestic biodiesel programme.
"We will need to see how Indonesia responds," said Anilkumar Bagani, research head of Sunvin Group, a Mumbai-based vegetable oil broker.
Malaysia benchmark palm oil prices have plunged about 25% since the start of the year, with demand hit by the closure of restaurants and eateries due to the pandemic.