CPO prices, Malaysian refiners may gain from Indonesia’s palm oil export levy hike — RHB

Crude palm oil (CPO) prices and Malaysian palm oil refiners could see gains following Indonesia’s decision to raise its CPO and refined palm oil export levies, according to RHB Investment Bank.

In a recent research note, RHB said the changes — effective May 17, 2025 — could improve global CPO price dynamics and slightly narrow the cost advantage long held by Indonesian downstream refiners. This, in turn, may enhance the competitiveness of Malaysian players.

RHB said the cost advantage of Indonesian downstream refiners is expected to narrow slightly, falling from US$84 (RM360) to US$80 per tonne, which could benefit Malaysian refiners.

Indonesia will increase its CPO export levy from 7.5% to 10%, while the levy on refined palm oil will rise from 4.5% to 7.5%, and for biodiesel from 3% to 4.75%.

The higher levies are aimed at boosting funding for the country’s Biodiesel Fund Agency, which supports its B40 biodiesel mandate and national palm oil replanting efforts.

RHB has named several Malaysian plantation and downstream players, including SD Guthrie Bhd (KL:SDG), Johor Plantations Group Bhd (KL:JPG), and Sarawak Oil Palms Bhd (KL:SOP), among its top picks that could benefit from the revised pricing landscape.

RHB said Indonesia’s higher export levy on CPO is expected to weigh on Indonesian plantation companies’ earnings.

Analysts estimate a 6% to 12% drop in annual earnings for Indonesian palm oil firms if CPO prices remain steady. RHB projects the effective selling price of CPO in Indonesia could fall by RM75 to RM113 per tonne, depending on the market price.

In 2025, under a CPO price assumption of RM4,300 per tonne, average selling prices could decline by RM108 per tonne for Indonesian and Singapore exchange-listed companies.

Despite the expected earnings hit, RHB believes Indonesia’s Biodiesel Fund Agency should have enough reserves to maintain subsidies for the B40 biodiesel mandate, provided gas oil prices stay above US$49 per barrel.

For the sector, RHB’s top Malaysian stock picks with potential earnings upside include IOI Corporation Bhd (KL:IOICORP) and Kuala Lumpur Kepong Bhd (KL:KLK).