Monday, 16 March 2015 17:52
KUALA LUMPUR: Malaysian palm oil futures slid to their lowest in nearly six weeks on Monday, after a decision by the second-largest producer to impose export taxes next month fuelled worries that price-sensitive buyers would switch to rival edible oils.
The benchmark June contract on the Bursa Malaysia Derivatives Exchange tumbled as much as to 2,172 ringgit ($ 586) a tonne in early trade, its lowest since Feb. 4, before ending the session at 2,199 ringgit, down 1.7 percent.
Malaysia, the world’s No.2 supplier of palm oil, said on Monday it would raise export duties for the crude grade to 4.5 percent for April, ending a duty-free policy held since September.
The decision made market participants jittery that the additional tax could further curb demand for the tropical oil.
“With the imposition of the export tax, market direction is looking a little murky,” said Lingam Supramaniam, director at Malaysia-based commodities firm Pelindung Bestari.
“Market continues to reel from demand concerns … the huge US carryout and South American output will put downward pressure on palm prices.”
Cargo surveyor Intertek Testing Services said exports of Malaysian palm oil products for the first half of March fell 3.4 percent compared to Feb. 1-15, as India and Europe cut back purchases.
Another cargo surveyor Societe Generale de Surveillance showed exports for the same period fell 5.2 percent.
Total traded volume on Monday stood at 50,354 lots of 25 tonnes, much higher than the usual 35,000 lots.
Analysts said palm prices, however, may draw support from a decision by Indonesia to raise its biodiesel blend to 15 percent from 10 percent as early as next week, aimed at boosting use of palm-based biodiesel.
“We estimate that a 15 percent blend could potentially raise Indonesia’s biodiesel consumption to 5.5 million kilolitres per annum, from 1.8 million kilolitres in 2014,” CIMB analyst Ivy Ng said in a note on Monday.
The top producer may also introduce tax breaks for crude palm oil producers to support the mandate, energy ministry officials said on Monday.
Elsewhere, Brent crude oil fell to around $ 54 a barrel on Monday, its lowest for more than a month, on rising global inventories and signs of a possible nuclear deal with Tehran that could allow more Iranian oil exports.
In vegetable oil markets, the most active September soybean oil contract on the Dalian Commodity Exchange lost 1.5 percent in late Asian trade, while the US soyoil contract for May was down 0.3 percent.
Copyright Reuters, 2015
