June 10, 2022
Market reacts to Indonesia’s CPO export tax and levy changes
1 RM (Malaysian Ringgit) = 0.18 USD
1 USD = 0.80 GBP
Malaysian Crude Palm Oil (CPO) settlement prices have remained volatile throughout the end of May and into early June. Seeing a high of 6,752 RM/tonne (1,224.16) on May 5, the month of May averaged a CPO settlement price of 6,330 RM/tonne ($1,147.65).
Price declines were seen into the middle of the month, with a price of 6,072 RM/tonne ($1,100.88) on May 19. Prices then became increasingly more volatile with a high of 6,533 RM/tonne ($1,184.46) on May 26, closing out June 8 at 6,467 RM/tonne ($1,172.49). The largest daily change up until June 8 was a 221 RM/tonne ($40.07) increase between May 23 and May 24.
Malaysia palm prices CPO Settlement Price RM
In the May 4, 2022 report, the market was seeing a rally following Indonesia’s palm export ban on April 28. Citing an improvement in domestic cooking oil supply, the Indonesian government lifted the export ban on May 23.
Despite opening up market supply, Malaysian CPO settlement prices remained strong. In an analysis on the Malaysian Palm Oil Council website, this is speculated to be a result of an increase in demand from India.
Indonesia to cut maximum palm oil export tax rate and levy to a combined $488/tonne
This took a turn on June 7, following the announcement from the Indonesian government that the CPO export and levy rate would be lowered from $575 per tonne to $488 per tonne.
Reported by Reuters, the rollback of the three-week export ban from April has been slow, resulting in complaints from farmers as prices remain low due to limited purchases from mills. The changes were done to help encourage CPO shipment.
The Indonesian government would raise the maximum tax to $288 per tonne, up from its current $200 export tax. It would also lower the maximum levy from $375 per tonne to $200 per tonne.
As of June 9 during the writing of this report, Malaysian CPO settlement price has dropped from 6,467 RM per tonne to 6220 RM per tonne.
In an exchange with Business Recorder, Refinitiv Commodities Research said the, “Flip-flopping of top producer Indonesia’s export policy has resulted in supply uncertainties, leading to high volatility in the palm oil market.”
Disclaimer: The information in this document has been obtained from or based upon sources believed to be reliable and accurate at the time of writing. The document should be for information purposes only and is not guaranteed to be accurate or complete.