KUALA LUMPUR: Malaysia’s export duty for crude palm oil (CPO) will kick in at 4.5% next month after being suspended for almost half a year. 

According to the Royal Customs Department order published on the Malaysian Palm Oil Board website yesterday, the price of CPO for March is set at RM2,288.41 per tonne, higher than the threshold of RM2,250 which triggers the tax structure.

The export duty rate begins next month after being suspended for almost half a year following efforts to stem further decline in palm oil prices. The government had suspended the export duty on CPO on Sept 14 last year after prices fell below the threshold of RM2,250 per tonne. 

However, the 4.5% duty is likely to negatively affect exports, although minimally, analysts told The Edge Financial Daily. 

JF Apex Research analyst Jessica Low said the duty is “not timely” as CPO exports were quite weak in the first 10 days of March. “It will affect the export of CPO, but the impact is not huge,” she said. 

Another analyst, who requested anonymity, said the duty will be a boon for local CPO refineries. 

“It will help channel CPO to local refineries rather than overseas,” he said. 

“The local refineries have been badly affected by the suspension of export duties, which led to low capacity utilisation,” he said. “Production will be at a low level until June this year, which will be good for CPO prices,” he added. 

Over the past six months, the CPO third-month contract reached a high of RM2,375 per tonne on March 4, 2015. CPO prices rallied after Indonesia announced plans to triple the subsidy for biodiesel, a move that will boost CPO prices.

However, the analyst said declining demand from India could offset low inventories while China is likely to replenish its stocks after the Chinese New Year holidays. 

Exports of Malaysian palm oil products in February fell 14.5% from a month ago largely due to poor demand from China. 

India’s palm oil imports declined for a second month, falling 23% to 509,948 tonnes in February from 658,670 tonnes the previous month. In January, India’s palm oil imports dropped more than 20% month-on-month as refiners switched to sunflower and soybean oil due to contraction of price margins between soybean oil and palm oil.

This article first appeared in The Edge Financial Daily, on March 17, 2015.