MALAYSIA could see rising demand for palm oil from key overseas buyers in the coming weeks following its decision to suspend export taxes on crude palm oil for three months from today.

The government announced the tax suspension Friday and traders said the move will make Malaysian palm oil more competitive, especially in price-sensitive markets such as India and China.

“We are going to see buying coming in from China ahead of the Chinese New Year. India will also restock in the first and second quarter of the year as they have low stock levels,” said a Kuala Lumpur-based trader, who estimates that Malaysian palm oil exports could pick up 10-15 percent on a monthly basis.

Malaysia usually calculates a reference price each month to determine the crude palm oil export duty rate, whereby a price above 2,250 ringgit (US$563) incurs a tax.

Its last calculated reference price for January was 2,623.31 ringgit per ton, effectively incurring a 5.5-percent tax rate.

The minister of plantation industries and commodities Mah Siew Keong told a press conference Friday the tax suspension was aimed at boosting palm oil prices and reducing high stockpiles, adding that he expected stocks to continue to increase in 2018.

The suspension, which is open to all companies with crude palm oil export licenses, will be scrapped before the end of the three-month period if crude palm oil stocks fall to 1.6 million tons.

“(The tax suspension) is one of the short-term pre-emptive measures by the government to manage the fall in crude palm oil prices, so that the smallholders’ (small-scale farmers) incomes are not impacted and the country’s oil palm industry continues to be competitive,” Mah said.

Palm oil inventories in Malaysia, the second-biggest producer after Indonesia, had already risen to near two-year highs by the end of November, squeezing benchmark prices to a 16-month low in mid-December.

Official data showed stocks grew 16 percent in November, from October, to 2.56 million tons due to weak exports.

(SD-Agencies)