The Indonesian authorities’s selection to revise its export levy shape will hurt upstream palm oil producers in the united states, but can be a fantastic move for Indonesian downstream players and Malaysian planters, opined CGS-CIMB Research.

CGS-CIMB’s Ivy Ng and Nagulan Ravi cited that the brand new regime is superb for downstream palm oil players, like Wilmar International Ltd, as they’ll enjoy the wider differential within the export levy price between processed palm oil and crude palm oil (CPO) if CPO fees upward thrust above US$670 (about RM2,727.57) a tonne, in order to raise processing margins as they’ll able you obtain CPO at beneath international market charges.

In a be aware today, the analysts said Malaysian upstream palm oil producers — together with Hap Seng Plantations Holdings Bhd and Ta Ann Holdings Bhd — also are expected to enjoy the revision as it will make Malaysian palm oil extra competitive and enhance Malaysian palm oil fees if the export levy is surpassed on to customers.

For included palm oil manufacturers in Indonesia, estate income are likely to be negatively impacted by the better export levy structure but much less so than upstream producers as this could partly be offset by means of higher downstream earnings.

“The export levy alternate will not appreciably effect our earnings forecasts as we’ve got assumed a CPO fee of RM2,500/tonne (or US$610/tonne) for 2021. We retain our ‘impartial’ rating,” the analysts said.

They introduced that upstream planters in Indonesia — with Malaysian organizations including Genting Plantations Bhd and IJM Plantations Bhd — will no longer be capable of enjoy the same old bump in income if CPO fees rise past US$670 a tonne as most earnings will go to the higher export levy and export tax on the assumption that they’re now not able to bypass this directly to customers.

“To put matters into attitude, with the brand new shape in vicinity, the export levy for CPO can be US$a hundred and eighty/tonne, whilst export tax has been fixed at US$33/tonne for Dec 20. This approach CPO in Indonesia is priced at a reduction of as a great deal as US$213/tonne (RM864/tonne) to that in Malaysia (which presently enjoys 0 export tax on CPO),” they said.

Conversely, they cited that the regime change will make sure the continuity of the B30 biodiesel programme in addition to cushioning any drawback to CPO fees in the occasion of a palm oil deliver glut.

Earlier this month, the Indonesian government revised the export levy structure for palm oil exports, powerful on Dec 10, 2020 (Thursday). Under the new shape, the levy might be related to the reference fee of CPO.

As such, the export levy may be raised by means of US$12.50 to US$15 in line with tonne for every US$25 in keeping with tonne increase in the CPO reference charge beyond US$670 a tonne and up to US$995 a tonne. Previously, the export levy become fixed at US$25 to US$55 a tonne for CPO and processed palm merchandise regardless of CPO prices.

The changes are to assist rebuild the united states’s CPO Fund, which is sort of empty because of the widening fee hole among domestic biodiesel and gasoline oil, CSG-CIMB talked about.

Ng and Nagulan view that if the usa can export 34 million tonnes of palm oil and related merchandise in 2021 below the revised export levy structure, the price range amassed might be able to fund its B30 biodiesel programme.