KUALA LUMPUR: Malaysian palm oil futures rose on Wednesday on firm exports outlook and indications the world’s second-largest producer may cut export taxes, although concerns of slowing consumption in key market China capped gains.

The benchmark palm oil contract for July delivery on the Bursa Malaysia Derivatives Exchange gained 148 ringgit, or 2.34%, to 6,461 ringgit ($1,476.80) a tonne.

“The market is mostly tracking supportive external movement coupled with the anticipation of strong May exports. And, if Malaysia cuts export tax, that will set off some short-covering interest,” a Kuala Lumpur-based trader said.

Malaysia’s commodities ministry has proposed cutting the palm oil export tax by as much as half and will slow the implementation of its biodiesel mandate to help fill a global edible oil shortage, minister Zuraida Kamaruddin said in an interview with Reuters on Tuesday.

Further supporting prices, Malaysia’s exports for May 1-10 jumped 40.3% from the same period in April, cargo surveyor Intertek Testing Services said on Tuesday.

The contract had earlier rallied as much as 4.26% but eased after leading edible oil analyst Dorab Mistry said the world’s second-largest palm oil importer China are “no longer big bulls” in the commodities markets and will likely slow down its consumption.

Indonesia’s “unpredictable” palm oil export policies may help Malaysia emerge as the dominant supplier to India, the world’s top buyer of the edible oil, industry sources said.

Top producer Indonesia, which has banned exports of crude and refined grades, is seeking a balance between capitalising on high global palm oil prices while ensuring food at home is affordable, a senior government official said.