Malaysia still reviewing cut in palm oil tax after export ban lifted

Kamaruddin, Malaysia's Commodities and Plantations Minister, speaks during an interview in Kuala Lumpur.

KUALA LUMPUR - Malaysia is still reviewing the viability of a temporary cut of a crude palm oil export tax, the Commodities Ministry said on Friday after Indonesia lifted an export ban that rattled the market.

Malaysia, the world's second-largest palm oil producer, is looking to boost its share of the edible oil market after Russia's invasion of Ukraine disrupted sunflower oil shipments and Indonesia's ban on palm oil exports tightened global supplies.

Indonesia's top producer said it would remove the ban from Monday, and instead impose a domestic market sales requirement in order to ensure domestic supply of cooking oil.

In an interview last week, Minister Zuraida Kamaruddin told Reuters that her ministry had proposed lowering the tax to 4% -- 6% from the current 8% to the finance ministry, which has set up a committee to look into the details.

On Friday, Zuraida said that discussions with the finance ministry were still ongoing.

She said that the proposed temporary cut is pending a decision and that Malaysian exporters are likely to be clear winners in the short term, as global buyers will be looking for Malaysian palm oil.

She said that the ministry will continue to monitor the current situation involving Indonesia's policy changes.

Crude palm oil prices are likely to fall due to a rise in production but prices will stay elevated until mid- 2023 on tight global supply, a robust market and uptake from China, according to Zuraida.

She said that China is poised to increase palm oil demand later in the year as it slowly reopens its economy after the COVID 19 epidemic.

The prospect of a recovery in 2023 is more likely than predicted by the fact that Zuraida pegged edible oils and fats supply tightness to be easing by the fourth quarter, but not by much.