Govt allows 2-month duty-free CPO exports

KUALA LUMPUR: THE government has approved duty-free quota for crude palm oil (CPO) exports for September and October 2014, in the hope that it will help shore up prices of the commodity.

“At current five-year low prices, the government has decided to allow export of duty-free CPO for two months, namely; September and October,” said Plantation Industries and Commodities Minister Datuk Amar Douglas Uggah Embas, here, yesterday.

“This is a pragmatic move on the part of the government to boost CPO exports by 600,000 tonnes and help reduce stock level to 1.6 million tonnes by year-end,” he told reporters in a briefing.

MPOB figures showed Malaysia’s palm oil stock level for July stood at 1.68 million tonnes.


“Although some want to export duty-free CPO until the end of the year, the government is only agreeable for two months. We need to to assess the impact of this stop-gap measure.”

At the current palm oil prices of below RM2,250 a tonne, the minister said this short-term measure is unlikely to have a negative impact on downstream players such as refiners and specialty fats, oleochemicals and biodiesel manufacturers.

He confirmed that refined palm oil will remain tax-free.

After the expiry of approval of duty-free CPO end-October, Uggah stressed that, from November, the palm oil export duty structure goes back to what it was ranging between 4.5 and 8.5 per cent, depending on the CPO prices. 

If palm oil price hovers between RM2,250 to RM2,400 a tonne, the tax is 4.5 per cent. And if palm oil price were to rise beyond RM2,400 a tonne, the tax is five per cent.

To stem falling prices, the minister is proposing to the Cabinet to implement the B7 mandate (blending of seven per cent palm biodiesel with petroleum diesel) nationwide in three months.

“We hope to do this by December. We want to increase local consumption of CPO via the B7 programme,” Uggah said. “Hopefully, these cummulative measures will help support prices. I pray that prices will recover and perhaps average at around RM2,200 until the end of the year.” 

Yesterday, the third month benchmark palm oil futures jumped RM52 to close at RM2,030 a tonne.

Hamburg-based Oil World executive director Thomas Mielke, who was speaking at the Palm Oil Industry Forum held here, yesterday, believed that palm oil prices are close to bottoming out and are set to recover in the months ahead.

“At current low prices, consumption of edible oils for energy is increasingly rapid in many parts of the world. This would provide impetus to CPO price recovery,” he said.