PETALING JAYA: The competitiveness for Malaysia’s downstream palm oil products will decrease following the move by Indonesia to amend its export tax policy for crude palm oil (CPO) and refined palm oil export, says RHB Research.
The Indonesian government has, with effect from Sept 21, 2024, abolished export tax rates based on a graduated scale and put into place a fixed 7.5% export tax rate for CPO, to increase the competitiveness of palm oil prices in Indonesia and provide added value to the price of fresh fruit bunches at the farmer level.
Prior to this change, Indonesia had imposed a levy of between US$55 and US$240 per tonne for CPO exports, depending on a set of price brackets for the monthly reference price. The export tax rates for refined palm oil products and biodiesel are now also at flat rates of 4.5% and 3%.
“The change is expected to benefit all planters in Indonesia and make Indonesia more competitive than Malaysia.
“As an example (excluding all other costs), at RM4,000 per tonne, a CPO exporter in Indonesia will now receive RM3,371 versus RM3,248.
“Using the same example, the advantage that downstream refineries would have in Indonesia – at a CPO price of RM4,000 per tonne – should increase to US$84 (from US$79) versus Malaysia’s tax advantage of US$72 per tonne.” said RHB Research.
This, together with the revision in Domestic Market Obligation ceiling prices by 12% in mid-August would help Indonesia planters record higher effective average selling prices, said the research firm.
“The estimated increase in effective CPO price ranges RM20 to RM137 per tonne, based on a CPO price range of RM3,000 to RM4,500 per tonne.
“For 2025, based on our estimated RM3,800 per tonne CPO price assumption, this change would improve earnings of the Indonesia and Singapore-listed planters by RM116 per tonne.
“Hence, the earnings impact is likely to be in the range of 6% to 12% per annum, depending on forward sales strategies and percentage of local sales.”
RHB Research said overall, it remains “neutral” on the sector and made no changes to its earnings forecasts for now.
The firm’s top pick in Indonesia is PP London Sumatra Indonesia, while Malaysian picks remain a mix of pure and integrated planters in the likes of SD Guthrie Bhd, IOI Corp Bhd
, Johor Plantations Group Bhd and Sarawak Oil Palms Bhd.
