Market Updates – Issue 1, 2016
By GOFB on Sunday, March 27th, 2016 in Issue 1 - 2016, Market Briefs No Comments
By GOFB on Sunday, March 27th, 2016 in Issue 1 - 2016, Market Briefs No Comments
Summary
Palm oil producers against France’s new tax proposal
Malaysia and Indonesia have voiced protest against France’s plan to impose a progressive tax on palm oil with effect from next year.
On Jan 21, the French Senate approved an amendment to raise the import tax on palm oil from €100 per tonne to €300 from 2017; to €500 per tonne from 2018; to €700 per tonne from 2019; and €900 per tonne in 2020.
Malaysian Plantation Industries and Commodities Minister Datuk Amar Douglas Uggah Embas said the tax is unreasonable and is clearly intended to kill the palm oil industry.
He said this at a joint press conference with Rizal Ramli, Indonesia’s Coordinating Minister of Maritime and Resources, after a meeting of the Council of Palm Oil Producing Countries in Jakarta on Feb 4.
Uggah said Malaysia and Indonesia understand that the action is possibly to safeguard the French vegetable oil industry that is competing with palm oil, but noted that the tax would violate World Trade Organisation rules.
He said the move would affect millions of Indonesians and Malaysians working or involved in the industry.
Rizal said the implementation of an additional tax makes no sense and that France has no strong reason to do so. He also said this could hurt bilateral relations.
“The tax increase is malicious and intends to kill the palm oil industry in both countries as the selling price of palm oil is only €550 per tonne [….],” he said.
“Although France is a small market for Malaysia and Indonesia, the country’s move to increase the palm oil import tax could influence other countries to follow.”
Malaysia committed to B10 biodiesel
Malaysia remains committed to its plan to raise its biodiesel mandate to 10% despite low oil prices, said Plantation Industries and Commodities Minister Datuk Amar Douglas Uggah Embas.
He said the government is in the final stages of consultation with stakeholders on the B10 programme, which mandates a minimum 10% of bio content in diesel, and will submit a cabinet paper on this by the end of February.
“Yes, impacted, but price is not our only consideration,” the minister said when asked if low oil prices would result in a change of plans. “There are various considerations and the sum of that will guide the government’s biodiesel utilisation.”
Oil prices slumped to their lowest since 2003 in the week of Jan 20 as the market anticipated a rise in Iranian exports after the lifting of sanctions against Teheran.
Indonesia bans permits for peatland cultivation
New permits for cultivation on peatland areas should no longer be issued in Indonesia, in order to prevent fires that are difficult to extinguish.
President Joko Widodo said this at a National Coordination Meeting on Forest and Land Fire Prevention on Jan 18.
He also ordered the environment and forestry minister to take over the management of burnt peatlands; and instructed the newly established Peatland Restoration Agency (BRG) to work out an immediate draft action plan on caring for burnt peatland areas.
“I have explained to heads of state that what was burned was not forest areas, but peatland; [these] fires, if not immediately put out, could reach down to three to four metres below the surface and [are] very difficult to extinguish,” he said, referencing the seriousness of the problem.
The president stressed that efforts to prevent and put out land and forest fires should be improved this year. Fires should not be allowed to grow before efforts are made to extinguish them.
“There is no choice other than improving the handling of the ecosystem,” he said.
He had earlier said that Indonesia is serious about handling the damage to peatland, as evidenced by the establishment of the BGR on Jan 13 under presidential regulation Number 1 of 2016.
“We can convince the international community that we are serious, very serious, about handling the damage to the peatland,” the president said.
“Although these (land and forest fires) have happened repeatedly over the past 18 years, they serve as a valuable lesson.”
Malaysia-EU trade agreement expected soon
After a five-year process, negotiations for a Malaysia-European Union (EU) Free Trade Agreement (FTA) are expected to be concluded within the first quarter of the year. The agreement is Malaysia’s latest bilateral initiative with the EU.
Malaysia’s International Trade and Industry Minister II Datuk Seri Ong Ka Chuan said the FTA would boost the economy, as exports to countries like Germany and Italy would be free of taxes.
“We will actively pursue this negotiation and close it as soon as possible, especially since Vietnam has just closed a deal with the EU. We must not lose the [competitive] edge as Malaysia will benefit greatly from this bilateral trade,” he said.
Along with tax-free exports to, and the import of goods from, the EU – a 500 million-strong market of 28 countries – Ong said he expects increased foreign investment when the agreement is signed. More than 80 types of goods are currently being taxed.
He further noted the need to “activate the e-commerce industry beyond our borders, so traders and customers can deal with their goods freely once the FTA is signed, instead of having to go through the Customs Department and its taxation [procedures]”.
The lack of international e-commerce trade has meant that the Gross Domestic Product value of Malaysia is only 5.8% compared to the US (30%), China (20%), Singapore (15-20%) and Taiwan (14%), he said.
Malaysia and EU had commenced discussions on the FTA in 2010. These were put on hold last year as both sides were still studying the guidelines and limitations surrounding the agreement.
India cuts palm oil imports
Palm oil purchases by India fell in December 2015, the first decline during the year, as record stockpiles in the world’s largest buyer prompted traders and refiners to slow shipments.
Imports dropped 7.9% to 770,000 tonnes from a year earlier, according to the median of estimates from five processors and brokers compiled by Bloomberg. Total vegetable oil purchases, including soybean oil climbed 21% to 1.38 million tonnes, the survey shows.
Stockpiles in India had surged to an all-time high in December after traders boosted imports on concern that the first back-to-back shortfall in monsoon rain in three decades will shrink the oilseed harvest and worsen a cooking oil deficit.
The country, which depends on overseas supplies to meet 70% of its needs, will still import 1.3-1.5 million tonnes of vegetable oil each month in 2016, according to Sunvin Group, a Mumbai-based broker and consultant for the oil and oilseed industry.
“Higher stocks at ports and in the pipeline by the end of November [2015] kept palm oil imports lower,” said Nagaraj Meda, managing director of Hyderabad-based TransGraph Consulting.
Vegetable oil stockpiles jumped to a record 2.43 million tonnes on Dec 1, compared with a monthly requirement of 1.6 million tonnes, according to the Solvent Extractors’ Association. The government should increase the tax on imports of refined cooking oils to 27.5% from 20% now to curb cheap supplies and protect domestic oilseed crushers, the association said on Dec 21, 2015.
India buys palm oil from Indonesia and Malaysia and soybean oil from the US, Brazil and Argentina. Vegetable oil imports may climb to a record for a second year, increasing to 15.2 million tonnes in the 12 months that began Nov 1, 2015, from 14.6 million tonnes, Sandeep Bajoria, chief executive officer of Sunvin Group, said in December.
“Higher imports will continue because of low production and as farmers are also not selling their crop,” said Ashok Sethia, a director at Sethia Oils Ltd.
India’s monsoon-sown oilseed harvest is seen declining 11% to 12.6 million tonnes in 2016 from a year earlier, the Central Organisation for Oil Industry and Trade said last October. Soybean oil imports probably climbed more than five-fold to 490,000 tonnes in December from a year earlier; sunflower oil purchases dropped 34% to 100,000 tonnes; and canola oil purchases were 25,000 tonnes, the survey showed.
By GOFB on Sunday, March 27th, 2016 in Issue 1 - 2016, Publication No Comments
Some 12 hours later than anticipated, we were speeding up the Gum Gum Creek. The engines were going well. The steering was perfect. Again I took the wheel. Tundah sat on the front deck, to keep an eye out for sinkers. As we came out into the estuary, Tundah resumed his position at the wheel. Our mechanic friend had been right. It was almost dark. It was low water again, and the tide was starting to flow.
Read more »By GOFB on Sunday, March 27th, 2016 in Issue 1 - 2016, Branding No Comments
In Part 1 of this topic, I talked about the importance of creativity in branding, and how sometimes all it takes is just one individual to come up with good ideas which help build a brand. In fact, a single idea can transform the success of an entire product range or commodity.
Read more »By GOFB on Saturday, March 26th, 2016 in Biofuels, Issue 1 - 2016 No Comments
Indonesia’s B15 biodiesel programme stipulates to blend a mandatory 15% of fatty acid methyl ester (FAME, derived from palm oil) with 85% of diesel.
Read more »By GOFB on Saturday, March 26th, 2016 in Issue 1 - 2016, Environment No Comments
Southeast Asia is not a hotspot for carbon dioxide release – its peatland rivers emit much less of the greenhouse gas than previously assumed, a study has found.
Read more »By GOFB on Saturday, March 26th, 2016 in Issue 1 - 2016, Environment No Comments
A new piece of research published in the Proceedings of the National Academy of Sciences on mangrove forests has prompted a number of media outlets to make palm oil the story.
Read more »By GOFB on Saturday, March 26th, 2016 in Issue 1 - 2016, Environment No Comments
Malaysia’s single largest conservation area – nearly 24 times the size of Penang Island – has been created in the state of Sabah.
Read more »By GOFB on Saturday, March 26th, 2016 in Issue 1 - 2016, Environment No Comments
Anyone who follows the news would have heard of the alleged connection being made between the production of palm oil and global warming. Slash and burn agriculture, the destruction of peatlands and vast monoculture plantations are said to emit unprecedented amounts of greenhouse gases (GHG) into the atmosphere, effectively killing the planet.
Read more »By GOFB on Thursday, March 24th, 2016 in Issue 1 - 2016, Comment No Comments
Two heads are better than one. As leading producers of palm oil, Indonesia and Malaysia are rightly coordinating efforts to combat unjustified negative perceptions about the industry. All this while, the two governments and industry associations have acted independently to limit restrictions on palm oil. They have also worked to sway public perception with reasoned debate.
Read more »By GOFB on Thursday, March 24th, 2016 in Issue 1 - 2016, Comment No Comments
From Oct 29 to Nov 4, 2015, delegates from 17 WTO member-states met in Geneva, Switzerland, for the tenth round of negotiations on the Environmental Goods Agreement (EGA). Although Malaysia is not a party to the negotiations, it is worthwhile to take a look at the process and consider the potential implications of the EGA on world trade.
Read more »
