Malaysia crude palm oil export tax may resume in March - traders

By Emily Chow

KUALA LUMPUR, Feb 12 (Reuters) - A recent rise in crude palm oil prices is expected to trigger a resumption of Malaysia's palm oil export tax in March, prompting a potential shift in exports towards processed palm products.

Crude palm oil (CPO) prices have been rising due to concerns about lower production as an El Nino weather pattern brings scorching heat to Southeast Asia, reducing plant yields and cutting output.

Benchmark palm oil prices have gained 4.5 percent so far in 2016, while palm free-on-board prices (PALM-MYFOB-P1) have risen nearly 13 percent. Palm traded around 2,624 ringgit per tonne on Friday.

The world's second largest palm producer imposes a CPO export tax at 4.5 percent to 8.5 percent when a calculated reference price rises above 2,250 ringgit a tonne. Malaysia has maintained a zero tax rate since May 2015.

"Spot CPO prices may have averaged 2,300 ringgit per tonne between Jan. 10 and Feb. 9 and this could trigger the resumption of an export tax of 4.5 percent for CPO starting March 1," said CIMB Research plantations analyst Ivy Ng in a report.

"We view this as positive for refiners and negative for producers," Ng said.

The resumption of the tax could shift Malaysia's export product mix from CPO to processed palm products, and would be negative for Malaysia's CPO prices, along with recent strength in the ringgit, she said.

"But it won't kick in until March, so between then there could be a rush to export CPO. You could see exports being higher this month and lower next month."

Traders said the tax could dampen exports, but its impact may be minimal as exporters would likely absorb the cost and cut their margins to maintain sales.

The tax might not support local refiners much either, they said, as top palm producer Indonesia already imposes a higher $50 a tonne levy on CPO shipments.

This kept down Indonesian CPO prices for local refiners by making it more even more attractive for producers to sell domestically rather than export.

"Even with the taxes, Indonesia's prices are still cheaper compared to Malaysia due to their export levy. That's why we have been losing market share," said a trader from Kuala Lumpur.

Palm Oil Refiners Association Of Malaysia (PORAM), Mohammad Jaaffar Ahmad, said the tax will not be enough to help refiners compete with Indonesia.

"They still have a cost advantage because of the $50 levy." (Reporting by Emily Chow; Editing by Richard Pullin)