CPO extends rally from 2019 after India cuts import duties

Higher prices: A worker monitors a freight car filled with harvested palm oil fruit bunches being lifted inside a mill of a oil palm estate in Perak. CPO futures closed up RM74 per tonne yesterday. — Bloomberg

KUALA LUMPUR: Crude palm oil (CPO) futures on Bursa Derivatives Exchange extended its rally from 2019 to breach the RM3,100 per tonne mark yesterday, following India’s decision to cut import duties on the commodity.

The third-month benchmark CPO futures for March was actively traded at a high of RM3,144 per tonne and a low of RM3,043 per tonne, before closing at RM3,126 per tonne, up by RM74.

India’s lowering of import duties on the commodity raises demand expectations, says Anilkumar Bagani, head of research at vegetable oil broker Sunvin Group, according to Dow Jones wire report.

Public Investment Research said in its latest report that as part of a bilateral agreement, India’s Finance Ministry cut import duties on CPO and refined palm oil from South-East Asian countries effective Wednesday.

The duty on CPO was lowered to 37.5% from 40% while a tax on the refined CPO was cut to 45% from 50%.

The research house believed that this latest tax revision was set to boost Malaysia’s refined palm oil exports to India in the coming months as the duty gap between CPO and refined CPO has narrowed to 7.5% from 10% previously.

“The favourable move should help drive down Malaysian palm oil inventories and provide support to the current strong CPO prices. We maintain our bullish stance on the plantation outlook with a CPO price assumption of RM2,600/mt for this year.

“Our top three picks are Sarawak Plantation Bhd, Ta Ann Holdings Bhd and TSH Resources Bhd, ” it said.

Part of the bilateral agreement, India, the world’s largest palm oil buyer, has cut import duties on CPO from 40% to 37.5% and slashed duties on refined CPO from 50% to 45%. The lowering of import duties follows the trade agreement between India and Asean in 2009.

India has been cutting the import duty on CPO and refined CPO as well as a number of other key export commodities from Asean countries on an annual basis between 2010 and 2020.

“Malaysian refiners are set to reap the gain.

“The latest Indian tax revision has made palm oil more competitive against the alternatives such as sunflower oil and soybean oil, which have the narrowest spread in 10 years. The narrower duty differential between CPO and refined CPO from 10% to 7.5% will likely see Indian buyers switching their demand from CPO to refined CPO, namely, palm olein.

“Currently, refined palm oil imports in India account for 18.5% of consumption, and are expected to see a boost in the coming months.

“Supported by the duty disparity between CPO and refined palm oil products following the resumption of export duties in Malaysia, coupled with the latest tax move from India, Malaysian palm oil refiners are set to enjoy better margins than its counterparts, ” PublicInvest Research said.

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Malaysia , India , palm oil , exports , imports , rally , extens , duties , cut


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