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POINTERS 2014 MPOC
Palm Oil Internet Seminar
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2012 Price Direction, Issues & Challenges:
Policy Updates - What Will Be The Key Changes That Influence The Oils And Fats Market in 2012
By: Mr. Lim Teck Chaii & Mr. N. Balu

Mr. Lim Teck Chaii assumed the post of Market Analyst for MPOC since March, 2000. His responsibilities in MPOC includes delving deep into business issues and make use of the knowledge for the betterment of the organisation’s programmes. He has served as an analyst for Africa and Europe before being assigned to the Asia- Pacific Region in 2007. Prior to joining MPOC, he worked as an analyst for the Lembaga Tabung Angkatan Tentera, UMBC Securities and KAF Discounts Berhad. He holds a B. Econs. (Stats) and MBA ( Accounting ) from University of Malaya. He also has experience in presenting papers at international oils and fats conferences.
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Countries every year commission changes in policy. This is to address intrinsic pressure of a country to develop its economy, improve technologies, address environmental concerns and create sound investment and business conditions. Although most of these policies are aimed at improving the situation of the said country, it has positive and negative implications on trade and palm oil industry is not spared from the effects of those policy changes. This paper will share some of the latest policies that may encourage more palm oil buying or further impede palm oil trade in the world. There are five policies covered in this paper namely the Indonesian export duty structure, US Renewable Fuel Standard Program, Restriction of foreign investment in setting up vegetable oil processing plant in China from 30th January , 2012, EU Renewable Energy Directive and Malaysia Biodiesel Policy Implementation


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Questions & Answers (17) :
Mohammad Jaaffar Ahmad
6 years ago
Dear En. Fadzli, Firstly, as corrected earlier, I did not asked the question and not take credit for that. Secondly, congratulation on your new appointment as the new Regional Manager for Americas. Thirdly, what is Malaysian interest here i.e. the continuation of RFS or not? There is the answer to which party that we should support in the coming US election. I guess that will be your first KPI to achieve while lobbying in Washington DC and to report back. Finally, how optimistic are you/MPOC that EPA's NODA concerning renewable fuels produced from palm oil under the RFS program will be reviewed to favour palm oil to meet the minimum 20% GHG performance threshold? What have been done? TQ
Ahmad Fadzli
6 years ago
Dear Mr. Mohammad Jaaffar, Thank you for your interest and question on US RFS Program. In my humble opinion, RFS will not go through another 'refurbishment' process that will create RFS3. At least that is the general sentiment by stakeholders in the recent NBB expo in Florida. Neither are they optimistic on further extension of Biodiesel Tax Credit. The most interesting development in the short term is really on the political side. Many will agree that the fate of the US renewable fuel especially, biodiesel hangs in the balance depending on the results of the upcoming election. If Democrats continue holding the Presidential, then US RFS may live to see another day. However, should the Republicans come into power, it will not be a surprise if subsidies for US renewable fuels cease and mandate for usage is lowered or even scrapped altogether. MPOC will continue to keep our eye on the development and I am sure that we will have more discussions come the next update, possibly in our next POINTERS.
Siew Kim Seong
6 years ago
Dear Sir. I just want to check with you how dose the plasma scheme in Indonesia work. TQ
LIM TECK CHAII
6 years ago
TQ again. Mr. Teo Khain Aik for the new question. On your question on the reason for Indonesia's cheaper local CPO price compared to Malaysia: The Reason: Price setting for CPO sales is different. In the case of Indonesia, millers sells CPO in domestic market at international price less export tax. In Malaysia's case, our millers sells their CPO at internationa pricel. ( Further details may be found in the paper presented). For your next question, Malaysia's CPO export registered 3.47 million MT in 2011. This export is mainly from those companies having duty free CPO export quota. Meanhwhile, Indonesia exported 5.5 million MT during the same period higher than Malaysia.
LIM TECK CHAII
6 years ago
TQ again. Mr. Teo Khain Aik for the new question. On your question on the reason for Indonesia's cheaper local CPO price compared to Malaysia: The Reason: Price setting for CPO sales is different. In the case of Indonesia, millers sells CPO in domestic market at international price less export tax. In Malaysia's case, our millers sells their CPO at internationa pricel. ( Further details may be found in the paper presented). For your next question, Malaysia's CPO export registered 3.47 million MT in 2011. This export is mainly from those companies having duty free CPO export quota. Meanhwhile, Indonesia exported 5.5 million MT during the same period higher than Malaysia.
Anonymous
6 years ago
TQ again. Mr. Teo Khain Aik for the new question. On your question on the reason for Indonesia's cheaper local CPO price compared to Malaysia: The Reason: Price setting for CPO sales is different. In the case of Indonesia, millers sells CPO in domestic market at international price less export tax. In Malaysia's case, our millers sells their CPO at internationa pricel. ( Further details may be found in the paper presented). For your next question, Malaysia's CPO export registered 3.47 million MT in 2011. This export is mainly from those companies having duty free CPO export quota. Meanhwhile, Indonesia exported 5.5 million MT during the same period higher than Malaysia.
Mohammad Jaaffar Ahmad
6 years ago
Dear Mr. Lim, Re your second response, plant relocation etc will involve millions of ringgit of new investment. Where are you recommending them to relocate? Your suggestion to move upstream will also involve millions of ringgit investment. Running a plantation is not a 'forte' for the refiners. These are not a solution for the refining industry in Malaysia. In Indonesia, all CPO export has to be taxed i.e. there is no export duty exemption. Hence, for Indonesian CPO producers, either they export their CPO and pay the export duty or they sell their CPO locally, at CPO export duty count-back basis. The price differential between Malaysian CPO and Indonesian CPO is now about RM600 per tonne. This is the crux of problem faced by Malaysian refiners to compete with the Indonesian in terms of cost of processing. We should be looking at solving this problem in making a level playing field. Do you have any other good recommendations?
LIM TECK CHAII
6 years ago
TQ again. Mr. Teo Khain Aik for the new question. On your question on the reason for Indonesia's cheaper local CPO price compared to Malaysia: The Reason: Price setting for CPO sales is different. In the case of Indonesia, millers sells CPO in domestic market at international price less export tax. In Malaysia's case, our millers sells their CPO at internationa pricel. ( Further details may be found in the paper presented). For your next question, Malaysia's CPO export registered 3.47 million MT in 2011. This export is mainly from those companies having duty free CPO export quota. Meanhwhile, Indonesia exported 5.5 million MT during the same period higher than Malaysia.
LIM TECK CHAII
6 years ago
TQ, Mr. Teo Khain Aik. To your first question on the impact of new tax structure on Malaysian companies that have expanded to Indonesia; With the new tax structure, Malaysian companies that have expanded in Indonesia may see CPO produced fully utilised on-shore and product stream shifting towards refined palm oil and products.
Mohammad Jaaffar Ahmad
6 years ago
Dear Mr. Lim, Re your first response, can you confirm whether it is a Malaysian Government policy to provide duty free CPO to Malaysian overseas refining operation. Using the same logic, if Malaysian companies operate refinery(ies) in Indonesia, will the Government be obliged to give duty free CPO quota to these companies also? TQ
LIM TECK CHAII
6 years ago
TQ for the questions on Indonesian new tax structure, Mr. Mohammad Jaaffar. Regarding your question on the justification for the government to give duty free CPO quota, this is driven by the requirements of Malaysian overseas refining operation who need the duty free CPO to act as feedstock, In addition, the exports of the duty free CPO help to reduce and manage CPO stock level in Malaysia. To your question on the relocation of independent refinery operation: I wish to inform that there is no suggestion made in the paper. What was said is that the best option in the current situation is for companies to re-strategies to remain compeive. This may involve plant relocation, shipment, collection of feedstock etc. Based on Indonesia's business model, where the upstream heavily subsidise the downstream sector, for Malaysian independent operators to move upstream upstream looks a viable option.
Teo Khain Aik
6 years ago
Hi Mr Lim, may i know why Indonesia CPO price is cheaper than Malaysia CPO price? Although Indonesia CPO price is cheaper, but Malaysia seems like exported more CPO than Indonesia; Any reason? Regards, Teo
Mohammad Jaaffar Ahmad
6 years ago
Dear Sirs, Your last point in Slide 10 which states 'Malaysian CPO tax discourages CPO export but targets to make available sufficient CPO for refiners' warrants clarification. Can you justify why the Government of Malaysia since year 2000 have been giving out CPO duty free export quota to the tune of 3 million plus (in 2011) i.e about 15% of total CPO production of 18.9 million tonnes, when the total refining capacity is almost 23 million tonnes. What is the effect of high CPO export duty if there is a quota exemption given for duty free CPO? TQ
Mohammad Jaaffar Ahmad
6 years ago
Dear Sirs, 1. The word 'compeive' should be spelt as 'compeive'. 2. I did not posed the second question on US Renewable Fuel Program (RFS) TQ
Mohammad Jaaffar Ahmad
6 years ago
Dear Sirs, In your conclusion Slide 31, I am alarmed with your statement that 'For independent operators, they have to go upstream or relocate their operation to make it compeive'. What is your argument that by going upstream the independent refiners will get cheaper CPO? Secondly, are you suggesting our independent refiners to relocate outside Malaysia to be compeive? TQ
Anonymous
6 years ago
Dear sir, US Renewable Fuel Program (RFS) imposes the obligation to use biofuels on fuel producers and blenders. In 2010 and 2011, RFS required 1.15bn gallon (0.65bn from 2010's requirement + 0.5bn gallon carried forward from 2009's requirement) and 0.8bn gallon of biom-based diesel to be blended. However, the actual blended volumes were only 208m gallon and 1.07bn gallon respectively. By judging with the data, it seems that US fuel refining industry is having deficit of more than two million tonnes of biom-based diesel. Given that all obligated parties shall not have two consecutive non-compliance years, what is your view on the near- and medium-term development of US renewable fuel policy? Thank you.
Teo Khain Aik
6 years ago
Dear Sir, Based on the new tax in Indonesia, what is the impact for Malaysia company that have expanded in Indonesia and produce CPO at Indonesia? Thank you and regards, Teo
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