Crude Palm Oil Price (CPO) – Export Tax Aftermath

The export tax for crude palm oil (CPO) at was maintained at 8% for July 2021 for the seventh straight month. In a circular posted on the Malaysian Palm Oil Board's (MPOB) website, according to the Royal Malaysian Customs Department the 8% export duty rate was set after the CPO market price surpassed RM3,450 per tonne. A reference price of RM4,668.15 per tonne for July was calculated by the world’s second largest palm oil producer and exporter. The export for CPO in the RM2,250 to RM2,400 per tonne range and tax structure starts at 3%. while the maximum tax rate is going to set at 8% when prices exceed RM3,450 per tonne and this rate will be effective from July 1 to 31, 2021, a continuation of the export tax rate since Jan 1, 2021.

Indonesia changed its export tax structures aimed at luring investments into downstream facilities via differential taxes favoring downstream products (lower taxes on export of processed palm oil (PPO) vs CPO). CPO export taxes (of up to 30%) which meant that exporting CPO was not a feasible option unless they were granted CPO export free quotas by the government.

Malaysia is facing creeping imports (up 74% year-on-year) and declining exports (down 7%) in January-April 2021, no thanks to the Indonesian revamped progressive tax rates.

After all, the refiners are an integral part of the ecosystem as 77% of all Malaysian exports between 2011 and 2020 are in the form of PPO. In 2012, the refiners’ inability to operate profitably resulted in low utilization rates and CPO inventory was rising quickly in 2H12 during the seasonal peak production months. Eventually, it sent wrong signals to the market that led to CPO price sell down. That year, CPO spot price was down 29% year-on-year by end-2012 to RM2,231 per tonne.