Malaysia will allow crude palm oil exports at zero duty in January as the world’s second-largest producer seeks to reduce record stockpiles that drove prices to a three-year low last week.
The average price for calculating tax on shipments was set at RM2,147.81(US$702) a tonne for January, the customs department said in a notification yesterday. That’s below the minimum threshold of RM2,250 a tonne for tax to be applied, it said.
Palm oil, used in everything from instant noodles to soap bars, slumped to RM2,217 a tonne on Dec 13, the lowest price since November 2009, as output in Indonesia and Malaysia, the biggest producers, outpaced demand from China and India. Malaysia announced a cut in taxes and abolition of a duty-free export quota in October after inventories surged. The new tax rates will range from 4.5% to 8.5%, rising as prices climb from RM2,250 a tonne. The existing levy is 23%, according to the government.
“Export demand will pick up gradually in the coming days, and may ease stockpiles a bit,” Chung Yang Ker, an analyst at Phillip Futures Pte, said by phone from Singapore. “The current price level is too low for producers.”
The contract for delivery in February, the most-active by open interest, gained 0.2% to close at RM2,280 a tonne on the Malaysia Derivatives Exchange in Kuala Lumpur.
Futures lost 1% last week for a fourth weekly decline and are heading for a 28% drop this year, the worst annual loss since the financial crisis in 2008.