<News Analysis> Ministry of trade proposed US$575 per MT of export levies and tax at US$1,500 per MT CPO prices and will revoke DMO 30%
- Ministry of trades will cancel DMO 30% policy and cooking oil price cap of Rp14,000/L, but proposed a combined levies and taxes of US$675 per MT from previously US$375 per MT
- No new levies structure and price bracket yet at the moment
- It may theoretically capped Indonesia’s domestic CPO price at US$825 per MT (Rp11,800/kg) in April onward , assuming CPO price benchmark stays at US$1,500 per MT
What’s new
(Bloomberg) — Indonesia will increase its maximum levy on palm oil exports in line with higher global prices as the top grower looks to secure domestic supplies of cooking oil, according to Trade Minister Muhammad Lutfi.
• Crude palm oil export duties will be increased to $675/ton, from $375/ton currently, Lutfi said at a parliamentary hearing on Thursday. For every $50 increase in CPO, levy will be raised by $20/ton until it reaches the new maximum rate
• Government also adds a new bracket for CPO prices of between $1,000 and $1,500 a ton
• Higher export duties will make it more profitable for companies to sell palm oil to the domestic market, he said
• Indonesia plans to revoke its domestic market obligation policy on palm oil exports
• NOTE: Indonesia Issues Export Permit for 3.51 Million Tons of Palm Oil
Indonesia’s export levies and taxes for CPO
Source: MOF, News Article, DBS Bank
Our view
- We think the impact will be Neutral at this moment for domestic CPO price. Despite higher levies and taxes, the government will cancel Domestic Price Obligation (DPO) of Rp9,300/kg and Rp10,300/kg for CPO and Olein. Previously with 30% DMO, the adjusted Indonesia domestic price should be Rp13,290/kg. However with new scheme via additional export and taxes of US$675 per MT, the domestic CPO price will be Rp11,800/kg (US$825 per MT) on April onward still above our current FY22/FY23 Indo’s CPO price forecast of US$700 per MT (Rp9,800/kg).
- We think the new schemes should benefit Wilmar. The domestic CPO price will be still favorable to upstream planters despite it capped by additional levies and taxes, we see the new scheme benefit integrated refiners such as Wilmar. Wilmar could enjoy lower input cost from cheaper CPO from Indonesia, while it could reap good margin from both Indonesia and International vegetable oil market since Indonesia remove the domestic cooking oil price cap at Rp14,000/L also. We maintain BUY for WIL, FR, BAL and LSIP for plantation universe.