POINTERS: Policy Updates - What Will Be The Key Changes That Influence The Oils And Fats Market in 2012

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Questions & Answers (17) :

Mohammad Jaaffar Ahmad

12 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

12 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

12 years ago

Dear Sir. I just want to check with you how dose the plasma scheme in Indonesia work. TQ

LIM TECK CHAII

12 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

12 years ago

Anonymous

12 years ago

Mohammad Jaaffar Ahmad

12 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

12 years ago

LIM TECK CHAII

12 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

12 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

12 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

12 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

12 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

12 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

12 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

12 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

12 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