Additional foreign taxes seen making palm oil less competitive


  • Business
  • Thursday, 11 Feb 2016

The palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange rose as much as 0.82 percent to 2,568 ringgit a tonne, its highest since May 19, 2014, before settling down 0.6 percent 2,531 ringgit ($610.62) per tonne. Traded volume stood at 48,968 lots of 25 tonnes each.

PETALING JAYA: A poser to the current rise in crude palm oil (CPO) prices is the potential imposition of additional taxes on palm oil by Russia and France this year.

Analysts said this would deem palm oil to be less competitive compared with other edible oilseeds like soybean.

Russia is mulling imposing an excise duty on palm oil amounting to about US$200 per tonne by July.

France, meanwhile, is planning to introduce a progressive tax of about 197 euros (US$219) per tonne on palm oil-based products by March.

France and Russia imported around 126,000 and 748,000 tonnes of palm oil, respectively, in 2014, accounting for 1.5% of the world’s palm oil output.

A local exporter said: “This is bad news for palm oil exporters who are currently just recovering from the weak CPO prices last year.”

CPO is currently trading at RM2,500-RM2,571 per tonne from last year’s average of RM2,153.50 per tonne.

On France’s progressive tax, the exporter warned that if it was approved, palm oil exporters would need to fork out 300 euros, 500 euros, 700 euros and 900 euros per tonne for palm oil in 2017, 2018, 2019 and 2020.

“This is higher than the current 103 euros per tonne in tax palm oil exporters are paying,” he added.

After 2020, the tax would also be raised annually, as per the decision of the French ministry of finance.

But recall that in 2012, a similar bill called the “Nutella tax” had been proposed in France that would have imposed high taxes on palm oil imports.

However, it was reported that the bill was rejected in 2013.

CIMB Research, which is negative on the additional taxes on palm oil, said: “This will make palm oil less competitive against other competing oils.”

Currently, palm oil is trading at a discount of between US$60 and US$139 per tonne against soybean oils Brazil/Dutch fob.

“If the additional palm oil taxes of US$200 per tonne and 197 euros (US$219 per tonne) are imposed by Russia and France, it will make palm oil less competitive against soybean oils in these countries.

“This could result in lower palm oil prices due to weaker demand,” the research unit said in its latest report.

Although the amount of palm oil that may be at risk of being substituted with other edible oils may not be significant on paper, CIMB Research said it was concerned that the negative sentiment on the image of palm oil could spread to other countries, in particular those within the European Union (EU), which is a big consumer of palm oil at 12% of total palm oil output.

The EU including France imported about 2.43 million tonnes of palm oil from Malaysia last year, said the latest Malaysian Palm Oil Board report.

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