Jakarta, May 20 - A recent rally in the price of crude palm oil will trigger Indonesia's export tax in June after a seven-month freeze, but the move may not discourage shipments because of tight global supplies, industry officials say.
Indonesia, the world's biggest producer of the commodity, could export 16 million tonnes of palm oil this year, or about 78 percent of output, up from around 14.29 million tonnes estimated in 2008, the Indonesian Palm Oil Board has said.
The export tax, which is partly aimed at safeguarding domestic supplies of the raw material for cooking oil, could further boost palm prices and keep exports attractive.
"Whatever the price is, whatever the tax is, we will keep exporting," said Derom Bangun, the board's vice-chairman. "We will see export tax in June but that should have been taken into account in our export forecast."
The palm oil price has surged 55 percent this year, supported by fears over tightness in global vegetable oils supplies amid falling stocks in second biggest producer Malaysia, and low yields of competitor soyoil in South America.
"I am afraid we are currently in a sellers' market for vegetable oils," an influential industry analyst, Dorab Mistry, told Reuters. "Most consumers are sleeping through this. I don't like the export tax but we have to be realistic. It is coming." Mistry, head of vegetable oil purchasing at Indian conglomerate Godrej International, said early this week the palm price could surpass a key psychological level of 3,000 ringgit ($846) per tonne soon as Asian buyers hunger for more of the vegetable oil at a time of low stocks and weak output. [ID:nKLR431910]
According to a finance ministry decree, Indonesia will charge a minimum tax rate of 1.5 percent on crude palm oil exports if the reference price is at $701-$750 per tonne.
The government uses the average spot palm oil prices in Rotterdam, Europe's vegetable oils market, as its reference price.
The tax rate will be adjusted every month in accordance with palm price movement. A maximum tax rate of 25 percent will be applied if the reference price is higher than $1,250 per tonne.