UpdateTariffs for polymers unchanged on ample domestic supply

06 January 2009 10:57  [Source: ICIS news]

By Chow Bee Lin

(Recast lead and adds details throughout)

SINGAPORE (ICIS news)--China has kept the import duties on high and low density polyethylene (HDPE and LDPE) unchanged at 6.5% under the China-ASEAN free trade agreement (FTA) due to the large domestic capacity for these grades, Chinese traders and southeast Asian producers said.

“Imports account for around 30-40% of China’s LDPE demand, which has fallen from the 50% seen in recent years,” a southeast Asian PE producer said.

“China’s import demand for some grades of HDPE such as injection and blow moulding has also weakened significantly in the last two years due to increased domestic capacity,” a Chinese trader said.

Tariffs on polypropylene (PP) imports were also reduced slightly by 1.5% to 5% due to ample domestic supply, Chinese traders said.

China started up around 1.6m tonnes of PE and 1.95m tonnes of PP in the past two years, and a total of around 10m tonnes of new PE and PP capacity was expected to come on stream in the next four to five years, according to industry sources.

However, Chinese traders were surprised that import tariff rates for linear low density polyethylene (LLDPE) of ASEAN (Association of South East Asian Nations) origin, was only cut by a mere 1.5% to 5%, as the country remains relatively dependent on foreign material.

But some of these traders said it made little difference to LLDPE whatever the import tariff as except for Singapore, the other ASEAN countries are not major LLDPE exporters to China.

The mainland imported approximately 305,745 tonnes of LLDPE from ASEAN countries from January to November 2008 with over 84% of that amount coming from Singapore, according to statistics from the China Customs.

Chinese authorities had slashed import tariffs on thousands of goods originating from ASEAN countries in accordance with the ASEAN-China free trade agreement, which stipulates a gradual reduction or elimination of duties from 1 January 2005 to 2010.

Southeast Asian BPA, phenol and acetone exports to China gain a considerable advantage under new tariffs recently unveiled by the customs authorities which take effect 1 January, market sources said.

The 5.5% duty charged on bisphenol-A (BPA) cargoes entering the mainland’s ports from countries was removed from the start of 2009. (please see table below for tariffs on other petrochemical products)

While BPA producers from ASEAN countries stand to benefit from this trade liberalisation move compared to sellers of Russian and northeast Asian cargoes, they were not enthused to offload cargoes into China “considering the current lousy demand,” said a producer.

Global producer Bayer runs a 160,000-tonne/year BPA plant in Thailand, and Mitsui Chemicals operates a 230,000-tonne/year in Singapore, both of which are major players in the region.

Other producers in southeast Asia also cheered the latest tax reduction move and said that new trade dynamics would arise from these tax-exempt concessions.

“We will see more phenol and acetone from Thailand and Singapore as cargoes from these countries would be more competitive than other northeast Asian sellers to China,” a regional producer said.

In theory, Thailand’s PTT Phenol and Singapore’s Mitsui Phenol could gain a considerable advantage over Taiwanese, Japanese and Korean makers who have been slapped with anti-dumping duties of 3-6%, or more, by China Customs, especially when demand is relatively soft.

“We don’t care [about] the product origin,” an eastern China-based trader said in Mandarin. “If the price is competitive, then we will buy,” he added, underscoring the price sensitivity of the market.

On the other hand, other ASEAN-based producers of petrochemicals, which had seen relatively minor tariff adjustments, were lukewarm on China’s move to tear down trade barriers, especially amid the global economic downturn.

Nevertheless, the news had some impact on contact negotiations on pricing of petrochemical affected products.

“We’re still talking to our (PX) suppliers on contract pricing; I don’t think prices will drop just like that because of the reduced taxes, but it should encourage more supplies to come to China,” said a source from Yisheng Petrochemical, a purified terephthalic acid (PTA) producer in eastern China.

Chinese paraxylene (PX) end-users who buy regularly from Singapore and Thailand had yet to see aggressive offers from suppliers in these countries despite PX imports being tax-exempt now as compared to the 2% tariff that was previously charged, sources said.

In a tightly supplied market, ASEAN countries had shipped a total of 222,807 tonnes of PX towards China between January to November 2008. The shipments accounted for about 7% of China’s total PX imports, according to data from China Customs.

“The demand for Thai PTA may increase as a result, but  because the import tariffs for products from Korea and Taiwan have also fallen [for the new year], I think demand for PTA would still be strong for Korean and Taiwanese products,” said a source from Shanghai Oriental Trading.

PTA import duty originating from ASEAN countries had also been reduced by 1.5% while cargoes from Taiwan and Korea only have their tariffs cut by 0.5% to a current 6%.

Product	Old Tax Rate	New Tax Rates effective 1 January 2009
	（%）	Brunei	Indonesia	Malaysia	Burma	Philippines	Singapore	Thailand	Vietnam
Ethylene	2	0	0	0	0	0	0	0	0
HDPE	6.5	6.5	6.5	6.5	6.5	6.5	6.5	6.5	6.5
LDPE	6.5	6.5	6.5	6.5	6.5	6.5	6.5	6.5	6.5
LLDPE	6.5	5	5	5	5	5	0	5	5
Butadiene	2	0	0	0	0	0	0	0	0
PP	6.5	5	5	5	5	5	5	5	5
PVC	6.5	5	5	5	5	5	0	5	5
PS	6.5	5	5	5	5	5	5	5	5
ABS	6.5	5	5	5	5	5	5	5	5
BENZENE	2	0	0	0	0	0	0	0	0
TOLUENE	2	0	0	0	0	0	0	0	0
MX	2	0	0	0	0	0	0	0	0
PX	2	0	0	0	0	0	0	0	0
SM	2	2	2	2	2	2	2	2	2
PTA	6.5	5	5	5	5	5	5	5	5
MEG	5.5	5.5	5.5	5.5	5.5	5.5	5.5	5.5	5.5
PHENOL	5.5	0	0	0	0	0	0	0	0
METHANOL	5.5	0	0	0	0	0	0	0	0
ACETONE	5.5	0	0	0	0	0	0	0	0
BPA	5.5	0	0	0	0	0	0	0	0

Source: China Customs

With additional reporting from Dolly Wu, Jeremiah Chan, Liu Xin, Salmon Aidan Lee and Bohan Loh

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By: Chow Bee Lin
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