SINGAPORE/JAKARTA - Palm oil's share of global vegetable oil consumption looks set to climb in the months ahead as the top two producers engage in a tit-for-tat export tax tussle designed to boost sales.
Barely a month after number two producer Malaysia cut export tariffs, top palm oil maker Indonesia is preparing a similar move to boost sales of the tropical oil used for cooking and in products ranging from candies to cosmetics.
It might seem that Malaysia would then lose the competitive advantage it gained with its tax cut, which has pushed up shipments this month.
But traders and analysts say there's room for both countries to benefit at the expense of Argentina's soybean oil and Ukraine's sunflower oil.
Palm oil prices on the benchmark Bursa Malaysia Derivatives Exchange climbed to a one-month high this week as the market continued to rebound from a five-year low seen at the start of September.
Malaysian palm oil exports jumped more than 30 per cent in the first half of September from a month before, according to estimates from cargo surveyors, as a direct benefit of abolishing export taxes.
If international and local crude palm oil prices drop below US$750 (S$950) a tonne, Indonesia cuts its tax to zero, and that is expected for October.
But Jakarta may be looking at more extensive action involving export taxes on refined products, too. "We are now studying a change in the export tax structure to boost further our downstream palm oil industry," Panggah Susanto, director general for agricultural industries, told Reuters.
Refinery capacity in Indonesia, the world's top palm oil producer, is expected to jump to 45 million tonnes per annum by the end of 2014, up from 30.7 million last year and more than double the 21.3 million in 2012, according to the industry.
PALM OIL COMPETITIVE
Global edible oil supplies are forecast to climb, with expectations of record soybean production in the United States and a seasonal upswing in palm oil output in Indonesia and Malaysia, which account for 60 per cent of world vegetable oil exports.
Palm oil dominates the world edible oil market with a share of 62 per cent of global trade.