Singapore: Palm oil prices in Malaysia, the global benchmark, rose for the second day on expectations the doubling in export tax by Indonesia may restrain supply even as demand for the vegetable oil increases in India and China.
Indonesia, the world’s largest palm oil producer, said on Tuesday it would raise the tax on exports of the commodity next month to 20%. Malaysia’s palm oil exports gained 10% in the first 25 days of March compared with the previous month, Intertek, an independent surveyor, said.
“Such tax increase will discourage Indonesian players from exporting palm oil and will put more constraints on the global supply,” Fordyanto Widjaja, analyst at Morgan Stanley Asia Pte, said by telephone from Singapore.
Palm oil for June delivery gained as much as 161 ringgit, or 4.8%, to 3,501 ringgit a tonne ($1,095 or Rs43,909) before closing at 3,500 ringgit on the Malaysia Derivatives Exchange in Kuala Lumpur.
The rate on crude palm oil shipments will be raised to 20%, Erfandi Tabrani, a director for agricultural exports at the Indonesian trade ministry, said in a telephone interview in Jakarta. The government will also raise next month’s base price for calculating tax on exports of crude palm oil to $1,196 on 1 April from $988 a tonne in March, Erfandi said. Indonesian exporters pay the government tax on crude palm oil exports using a base price determined by the ministry of trade every month.
India, the world’s largest buyer of vegetable oil after China, lowered import duties on edible oil last week to ensure adequate domestic supplies and curb food prices.
“My expectation is that China may relax its price controls too,” Ben Santoso, analyst at DBS Vickers Securities, said by phone from Singapore on Tuesday.