SD Guthrie urges temporary exemption from Malaysia's CPO export duty

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SD Guthrie urges export duty exemption

Highlights

SD Guthrie Bhd has proposed a temporary exemption from Malaysia's CPO export duty for several months to clear stocks and smooth supply flows.
Malaysia imposes a tiered CPO export duty of between 3% and 10%, with the maximum rate of 10% applying to prices above RM4,050 per tonne, while the current spot price is RM4,292 per tonne.
The price gap between Malaysian and Indonesian CPO is now RM700-RM900 per tonne due to high duties, undermining export competitiveness; the proposal is expected to be discussed by the Cabinet on 6 Nov.

This article was translated from the original. Read the original version by our correspondent here.

Policy proposal to reduce excess supply

As reported by The Edge Malaysia, SD Guthrie Bhd has asked the government to consider temporarily removing the export duty on crude palm oil, or CPO, to give the industry room to clear accumulated stocks. The group's president and chief executive officer, Mohd Haris Mohd Arshad, said the measure need not be permanent, but should be in place for several months to allow supplies to reach the market more smoothly.

He said oil palm fruit cannot be stored for long like soybeans, as harvested fruit must be sent to mills promptly for processing. SD Guthrie operates 68 mills and produces more than two million tonnes of CPO a year, making the movement of supplies out of the market important to the company's operations and the entire industry supply chain.

Malaysia imposes a tiered export duty of between 3% and 10% on CPO when prices exceed RM2,250 per tonne. The maximum rate of 10% applies when prices surpass RM4,050 per tonne, while the Malaysian Palm Oil Board's CPO spot price stood at RM4,292 per tonne on 4 Nov.

Competitive pressures and impact on the industry

The high export duty makes Malaysian CPO more expensive than supplies from Indonesia, undermining the country's export competitiveness. Industry estimates cited indicate that the price gap is now between RM700 and RM900 per tonne, as strong production in recent months coincides with logistical problems hampering shipments.

The proposed duty exemption is expected to be discussed at a Cabinet meeting on Friday, 6 Nov. In trading at the time this report was published, SD Guthrie shares rose eight sen, or 1.35%, to RM6.01, giving the group a market capitalisation of RM41.56 billion.

In our earlier report on Malaysia's CPO reference price for November, we explained that the reference price was lowered to RM4,323.78 per tonne from October. However, as the price remains above the RM4,050 per tonne threshold, the export duty stays at the maximum rate of 10%, maintaining export costs and regional competitive pressure on Malaysian exporters.

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