KUALA LUMPUR (Oct 20): A waiver of export tax on palm oil reportedly under consideration could help Malaysia claw back some market share from Indonesia, an analyst said on Tuesday.

The proposal will be a relief for Malaysian exporters of crude palm oil (CPO) while narrowing the sharp discount with their Indonesian counterparts, Public Investment Bank said. Indonesia's CPO has been trading at a steep discount of RM700-RM900 per tonne to its Malaysian counterpart, the house noted.

“We believe the proposal would be well received and likely will take effect soon,” Public Investment said.

Bloomberg reported that senior staff at the Ministry of Plantation and Commodities will meet with top industry executives on Tuesday to discuss temporarily lifting the levy as a way to boost shipments and whittle down record-high inventories.

Palm oil inventory in the world’s second-largest producer ballooned to a record 3.5 million tonnes in September, even as sweltering heat from El Niño weather conditions threatens to cut yields.

Malaysia has a multi-tier tax rate of between 3.0% and 10% for exports of CPO when prices per tonne exceed RM2,250, with the maximum rate kicking in above RM4,050. The duty rate was held at 10% for November based on the reference price of RM4,323.78.

The CPO tax waiver should be in place until the inventory level falls below two million tonnes, Public Investment said.

“Upstream players are the potential winners while the downstream players might face margin pressure due to higher raw material costs,” the house added.

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Malaysia considers waiving palm oil export taxes to clear glut — Bloomberg