Reinstatement of crude palm oil tax won’t affect EU demand, says council

Malaysia will lodge a complaint with the World Trade Organisation over the EU’s move to phase out palm biofuels by 2030.

KUALA LUMPUR: The reinstatement of crude palm oil (CPO) export tax starting next month is unlikely to affect demand in the European Union, according to the Malaysian Palm Oil Council (MPOC).

Its CEO, Kalyana Sundram, said the EU market is less troubled by the pricing mechanism and more concerned about the quality and sustainability of the products that Malaysia’s CPO can offer.

“What will happen is, the markets which prefer CPO — particularly India, which prefers it over refined palm oil — might look for the best pricing in the global arena.

“So our CPO exports to India may be reduced as a result of the tax, but there are other players in India who are also buying refined palm oil products and they will continue buying.

“Overall, the CPO export tax would not have a major impact on the industry,” he said after delivering his keynote address at the Second Global Indian Millers Conference here today.

Kalyana Sundram.

Kalyana said so far this year, the EU has imported 2.2 million tonnes of palm oil from Malaysia compared with 1.91 million tonnes for the whole of 2018.

Of these 2.2 million tonnes, he said 1.4 million tonnes were used in the food industry while the remaining 800,000 tonnes went to the renewable energy industry in the continent.

“Malaysia is quite lucky because of the quality assurance of our palm oil and our long-term partnerships with some of the major multinational food companies in Europe,” he said.

On the EU’s plan to phase out palm biofuels by 2030, he said Malaysia would lodge a complaint with the World Trade Organisation over the EU’s move.

It also expected to find new markets for the extra 800,000 tonnes of the palm oil, Kalyana said.

“We will find new markets in Africa, Asean, China or India. So, it will be seen as a rebranding or refocusing of Malaysia’s palm oil destinations.

“At the end of the day, it will be a zero-sum game,” he said.

Asked if the CPO export tax would make the local commodity less competitive in the global market, Kalyana shrugged off the concerns as he said Indonesia is also taking a similar approach next year.

The Indonesian government was reported as saying in September that it would impose export levies for CPO products and its derivatives from Jan 1, 2020.

“So everything is normalised,” said Kalyana.

Early this month, the Malaysian Palm Oil Board said the government would raise the export duty for January buying to 5% after calculating the reference point for January’s buying at RM2,571.16 per tonne.

An export tax of 4.5% was imposed in August last year but the government gave a tax-free exemption for CPO exports to boost palm oil exports and expand into new markets from May 1 to Dec 31 this year.