This article first appeared in The Edge Financial Daily on November 21, 2017
KUALA LUMPUR: Sime Darby Bhd, which exports nearly one million tonnes of palm products to India yearly, expects its profit to be hit by India’s highest-ever import levy hike on crude palm oil (CPO) and refined palm oil in more than a decade.
“We will have to take a look at it (tax hike), as in what best to sell — whether crude palm oil or refined products,” said Sime Darby Plantation chief executive officer Datuk Franki Anthony Dass. “[The levy hike is because] India wants to protect its refineries and edible oils.”
India is an important market for Sime Darby and hence the need to review the new tariff, Dass told reporters after Sime Darby’s annual and extraordinary general meetings yesterday.
Last week, India raised the import duty on CPO to 30% from 15%, three months after increasing it in August. New Delhi also pushed up the import levy on refined palm oil to 40% from 25%.
The levy hike is said to be aimed at lifting India’s local oilseed prices, and protect local oilseed farmers’ interest.
However, Dass said despite the hike and India being the world’s largest export market for CPO, he was certain that the CPO price would continue to hold around RM2,700 per tonne until early 2018.
He said demand for palm oil is still good and Indonesia’s strong B20 biodiesel blending mandate (to 20% from 15%) for vehicle fuel has resulted in Indonesia consuming more than four million tonnes.
“Stocks are high, so that would stabilise the price of CPO. This is a commodity game, so demand will be up and down. However, the price will hold around RM2,700 per tonne until early next year.
“As long as the price is around RM2,500 per tonne, we are still good. On cost of palm oil per tonne, we do about RM1,500, including the levy or cost of sales,” he added.
Dass said there was a profit margin because the plantation unit was always looking to bring down the cost of production.
Meanwhile, Sime Darby would be among four big palm oil players in Malaysia, including IOI Corp Bhd, Kuala Lumpur Kepong Bhd and Felda Global Ventures Holdings Bhd, to ship the country’s first Malaysian Sustainable Palm Oil (MSPO)-certified oil to European Union (EU) countries by the end of the year.
The shipment to Rotterdam Port in the Netherlands is in line with Plantation Industries and Commodities Minister Datuk Seri Mah Siew Keong’s vision to ship the first MSPO-certified oil by the end of 2017.
Asked if the impending EU ban on palm-based biofuels by 2020 would affect Sime Darby, Dass said the use of the oil for that purpose was minimal.
“We produce about 60,000 tonnes per year, which is less than 1% of our total CPO production, and it is locally taken up by Petroliam Nasional Bhd and Royal Dutch Shell plc. So, we don’t export any palm-based oil for biofuel,” he said.