The Ministry of Trade reintroduces a US$3 per ton export tax for crude palm oil (CPO) shipments in January 2017 as the reference palm oil price exceeded the US$750 per ton threshold that separates the existence of export duties from zero rates. The Government’s reference price was set at U$$788.26 per ton for January 2017.
Compared to the previous month, Indonesia’s reference palm oil price rose 5.18% (m/m) or US$38.79 to US$788.26 per ton in January 2017. Thanks to the El Nino and La Nina weather phenomena (and a moratorium on new palm oil concessions) CPO output was curtailed in Indonesia in 2015 and 2016, implying some upward pressure for CPO prices.
During 2016, the Government applied export tax to CPO twice in May and October, when the CPO price reference reached US$750 per ton. The CPO prices moved at range of US$750-800 per metric ton this month, higher than previous month, due to seasonal factor.
Meanwhile, the Government’s reference price for cocoa beans in January 2017 fell 8.96% (m/m) to U$$2,343.97 per ton, caused by the drop in international cocoa bean prices. The export tax on cocoa beans stays at 5% in the first month of 2017.
On minerals, the Government will also ban the export of unprocessed minerals starting January 12, 2017. This policy was once planned for January 12, 2014 but the then-President Susilo Bambang Yudhoyono (SBY) issued a presidential regulation to allow the continuation of unprocessed ore exports until January 12, 2017 (hence the three-year delay).
The Central Government needs to provide clarity about the ban on exports of unprocessed minerals. Big international mining companies, such as Freeport Indonesia and Newmont Nusa Tenggara, continued to export copper concentrate but had to agree to contract renegotiations in order to make their contracts in line with the 2009 Mining Law (including the requirement to establish local smelting facilities).
The reason why SBY issued the presidential regulation was because Indonesia was not ready for the full export ban: there was not enough smelting capacity available to refine the nation’s mining output. Therefore, a full ban would have been disastrous for Indonesia’s mining industries, employment, and government revenue.
But domestic ore consumption will continue to rise as more and more smelters come online. Moreover, commodity prices are seemingly recovering, led by recently rising crude oil prices. This context makes it more attractive for miners to speed up smelter development.
By Yohannes Obor
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