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Malaysia's palm oil exports set to rise following tax suspension

KUALA LUMPUR (Xinhua) – Malaysia, the world’s second largest palm oil producer after Indonesia, may see its palm oil exports increase after its government suspends export taxes on crude palm oil (CPO) from yesterday.

Malaysian Plantation Industries and Commodities Minister Mah Siew Keong announced recently the suspension of export taxes on CPO for three months from January 8 Monday to April 7, in a bid to boost palm oil prices and reduce high stockpiles.

The taxes removal, however, will end early if CPO stocks fall to 1.6 million tonnes.

According to Malaysian Palm Oil Board, Malaysia’s CPO export tax for January 2018 was 5.5 per cent; Malaysia’s stockpile in November 2017 stood at a two-year high of 2.56 million tonnes.

Analysts said the export taxes suspension is expected to improve Malaysia’s CPO exports competitiveness and give a short-term boost to its exports to major importers such as China and India.

A worker gather oil palm fruits at a factory in Sepang outside Kuala Lumpur. – AFP

“This will help boost CPO exports from Malaysia as it will be more competitive against Indonesian CPO exports, which are subject to a CPO levy of 50 US dollar per tonne,” said CIMB Research’s analyst Ng Lee Fang.

She sees it as a positive move for Malaysian planters in the near term as based on the latest export taxes, it would allow CPO exporters in Malaysia to save 144 ringgit (36.1 US dollar) per tonne.

“We also believe that major consumers such as India and China will take this opportunity to buy more palm oil from Malaysia,” said MIDF Research’s analyst Alan Lim, adding that the demand from China is supported by pre-stocking activity ahead of the Chinese New Year in mid-February.

Concurred with Lim, Public Investment Bank Research’s analyst Chong Hoe Leong believed the move will give a boost to Malaysia’s palm oil exports amid the upcoming Chinese New Year celebration.

“Price sensitive importers like India will likely import more while China, the second largest palm oil importer, will also lock in more orders as demand picks up ahead of Chinese New Year in February,” he added.

But he also pointed out the possibilities of similar measures by other countries.

“Indonesia, the world largest palm oil producer, might also roll out some incentives to undercut the CPO prices in order to push for their palm oil exports,” he said.


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