KUALA LUMPUR: Malaysia is keeping the tax rate for the export of crude palm oil (CPO) for March at zero, given that the average CPO price from January 10 to Feb 9 was still below the lowest reference price of RM2,250 per tonne.

Last Thursday, Plantation Industries and Commodities Minister Datuk Seri Douglas Uggah Embas  had announced that the government would revert to the export tax rate mechanism next month after exempting CPO from export taxes between September 2014 and February this year to help cope with rising inventory and falling prices.

Analysts had expected the government to impose a 4.5% CPO export tax for March and thus, they were surprised to see it maintained at zero rate.

According to the Royal Malaysian Customs department order published on the Malaysian Palm Oil Board website yesterday, the CPO price in March stood at RM2,232.88, lower than the RM2,250 threshold where the tax structure would kick in. 

The average price of CPO that the export duty relies on is determined on a month-to-month basis.

A Plantation Industries and Commodities Ministry spokesman told The Edge Financial Daily yesterday that the CPO price for March was arrived at after the average of CPO prices recorded on the last 20 trading days in January and the first trading days in February were calculated.

He said the determined price also takes into account regional factors.

“Looking at those prices then, and when you average it out, it is still below RM2,250 per tonne,” he said.

When contacted, Public Investment Bank Bhd analyst Chong Hoe Leong said he was surprised by the zero rate announcement.

“We had expected the government to impose a 4.5% CPO export duty for March because (we had calculated) the average price between Jan 10 to Feb 9, to be above RM2,250,” he told The Edge Financial Daily.

“But their (authorities) calculations were below [the threshold]. So I’m not sure how it (calculation) works,” he said.

Still, Chong said the move is good for the market as it will flush out the excess inventory.

“It is likely that inventories in February will be lower. We are still in the low cycle period,” he said, referring to the low production season at the year-end of each year extending into the first few months of the new year.

Chong said the extension of the zero rate on export duties was probably the reason for CPO prices rebounding yesterday to about RM2,312.

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