Malaysian crude palm oil futures closed 2.2 percent higher on Monday, boosted by Indonesia's decision to raise export taxes on palm oil and its products. Dealers said the export tax would have little impact on demand from the world's top buyers China and India but would fuel palm oil prices, which are 12 percent off a historic high of 2,764 ringgit.
The benchmark September contract on the Bursar Malaysian Derivatives Exchange settled up 54 ringgit or 2.2 percent at 2,457 ringgit ($718) a tonne after hitting a high of 2,500 ringgit.
"The Jakarta news is timely as it will reverse the technical downside for a short while," said a Malaysian trader. "Players will be taking full advantage of this bit of bullish news." Other traded months rose between 30 and 56 ringgit. Overall trade doubled to 20,900 lots of 25 tonnes each.
September palm oil on Singapore's Joint Asian Derivatives Exchange was up $17.00 at $723.00 a tonne in thin trade. Indonesia raised 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.
"This will have a very, very marginal impact on volumes," said Atoll Chaturvedi, president of Aden Exports. "Though the cost of imports will go up." He said some purchases could be deferred. Chinese traders said the impact on buying would be marginal as the country imports mainly from Malaysia.
Soyaoil futures on the Chicago Board of Trade moved in tandem with palm oil prices. In electronic trading during Asian hours, the July contract was up 1.03 percent at 36.25 cents a lb. Soyaoil competes with palm oil because of common use in products ranging from cosmetics and candies to befoul. The Kuala Lumpur Plantations Index ended 3 percent higher at 6172.64 points on rising palm oil futures.
Sector bellwether IOI Corp Bhd surged 7.8 percent and Kuala Lumpur Keeping Bhd climbed 2.3 percent. But Golden Hope Plantations Bhd was unchanged. "Clear winners will be Malaysian companies with no exposure to Indonesian plantations. But those with extensive Indonesian land holdings might be affected by the export tax, even though this is temporary," said an analyst with a local brokerage.
"However, the increase in export tax will raise palm oil prices across the board and most Malaysian palm oil companies should stand to gain from this," he said. Many Malaysian planters, unable to find opportunities to expand at home, have invested heavily in plantation lands in Indonesia.
In Malaysia's physical market, crude palm oil for June shipment in the southern region was quoted at 2,620/2,650 ringgit a tonne. Trades were done between 2,610 and 2,650 ringgit.