Malaysia considers suspending crude palm oil export tax to reduce excess supply
Malaysia is evaluating a temporary measure to suspend the crude palm oil export tax as inventories rise to record highs. The proposal comes as the world's second-largest producer seeks to boost shipments and regain some regional market share.
Highlights
- Officials from Malaysia's Ministry of Plantation and Commodities will discuss on Tuesday the temporary suspension of the 3.0%-10% crude palm oil export tax.
- The export duty rate remains at 10% for November 2023 based on a reference price of RM4,323.78 per tonne, while Malaysia's palm oil stocks reached a record high in September.
- Suspending the export tax could boost Malaysia's exports and help it recapture market share from Indonesia, which raised its export tax to U.S.$308 per tonne for October.
This article was translated from the original. Read the original version by our correspondent here.
Proposed tax relief and price background
As reported by The Edge Malaysia, citing Bloomberg, senior officials at the Ministry of Plantation and Commodities will meet with senior industry executives on Tuesday to discuss the temporary suspension of the export levy, according to sources familiar with the matter.Malaysia imposes a tiered tax rate of between 3.0% and 10% on crude palm oil exports when the price per tonne exceeds RM2,250, with the maximum rate taking effect when prices surpass RM4,050. The duty rate was maintained at 10% for November based on a reference price of RM4,323.78.
Implications for inventories and regional competitiveness
Malaysia's palm oil inventories rose to a record high in September, even as extreme hot weather caused by El Niño conditions threatened to reduce output yields.If implemented, the tax exemption could help Malaysia increase exports and regain some market share from Indonesia. The neighbouring country previously raised its combined export tax and levy on palm oil to U.S.$308 per tonne for October, reshaping the regional competitive landscape for palm oil producers.
In our previous report on Malaysia's lower crude palm oil (CPO) reference price for November, we explained how the level of RM4,323.78 per tonne still keeps the export duty at the maximum rate of 10% because it remains above the RM4,050 threshold. We also explained that this situation maintains export costs for industry players despite the lower reference price, thereby affecting regional shipment competitiveness.
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