FocusASEAN plastics makers gingerly await zero tariff in 2010

14 December 2009 07:18  [Source: ICIS news]

By Chow Bee Lin

SINGAPORE (ICIS news)--Plastic resins manufacturers in southeast Asia are bracing for the enforcement of a zero tariff within the region effective next year, but a number of them are hoping implementation will be deferred to 2015, industry sources said on Monday.

Singapore, Indonesia, Malaysia, the Philippines, Thailand and Brunei are the six members of the Association of South East Nations (ASEAN) that agreed to remove import duty for a range of products, including polyolefins, starting 2010 under a free trade pact.

Concerns that the policy would erode market shares of individual companies in each member country make the plastics players wary about tearing down the trade barriers, according to industry associations across the region.

Regional polyolefins producers were particularly concerned about competition from the region’s largest resins production bases – Singapore and Thailand – where new capacities were scheduled to come on stream this and next year, industry sources said.

The zero-tariff policy could be reversed soon after its implementation when an affected player complains, they said.

In the Philippines, if any of the local resin producers were to apply for a ‘temporary restraining order’ in court, the current 10% duty might be reinstated, said Alfonso Siy, president of the Philippine Plastics Industry Association (PPIA).

Indonesia may also reinstate its 5% duty on polyolefin imports from ASEAN “if it believes that a zero import duty policy would render the local polymer makers uncompetitive”, said Budi Susanto Sadiman, secretary general of the Indonesian Olefins and Plastic Industry Association (INAPLAS).

The Indonesian government was expected to make a call on the issue in the first quarter next year, Sadiman added.

In Malaysia, a possible heightening of competition from neighbouring Singapore is a source of concern, said a local polyolefins producer.

The three resin producers in Singapore, namely ExxonMobil, The Polyolefin Company and Chevron Phillips, export polyolefins to Malaysia mainly by trucking the material across the border that links Singapore and the southern part of the Malaysian peninsular.

Singapore is estimated to have a total of over 2m tonnes/year of PE capacity and over 1m tonnes/year of PP capacity when ExxonMobil start up its new plants by 2011.

Thailand, on the other hand, is expected to increase its polyethylene (PE) capacity by 88% to 3.6m tonnes and its polypropylene (PP) capacity by 56% to 1.95m tonnes by the end of 2010, when major Thai producers PTT Chemical and Siam Cement start up all their new plants.

“The question is whether the Thai producers will be flooding the southeast Asian market, or strategically they would rather find better opportunities elsewhere,” an Indonesia polyolefins producer said.

In the event Indonesia reinstates the 5% duty on plastic resin imports from its ASEAN neighbours, Malaysia’s plastic resin producers were expected to see how its counterparts in Thailand and Singapore would respond, before they decide on an appropriate response, a second polyolefins producer in Malaysia said.

The Ministry of International Trade and Industry (MITI) of Malaysia has confirmed that the country is committed to abolish the 5% import duties under the regional trade pact, including plastic finished products and resins by 1 January 2010, said Lim Kok Boon, chairman of the Malaysian Plastics Manufacturers Association (MPMA).

Malaysian plastics converters would be put to a disadvantage if plastics finished products are duty free while the resins are subject to an import duty, said Lim.

But MPMA has always been for promoting free trade within ASEAN, he said, citing that Malaysia had cut the duty on imported plastic finished goods in 2000, three years earlier than what was stipulated in the regional trade pact.

Thai resin producers were unlikely to lobby for a retaliatory measure if Indonesia reinstates the 5% import duty on ASEAN polyolefins, as their bigger concern was competition from the Middle East, local industry sources said.

“Local polyolefins producers (in Thailand) are more concerned about how their share of the local market would be affected when recently started up plants in the Middle East achieve normal production and start exporting large volumes to Asia regularly,” a source at the Petroleum Institute of Thailand (PTIT) said.

Middle East polyolefins imports are subject to a 5% duty in Thailand. This coupled with their lower feedstock costs make Middle East suppliers a formidable competitor to Thai producers, the PTIT source added.

If Indonesia or any ASEAN member country decides to defer the zero duty, resins producers in Singapore would look to the local government to further negotiate for a favourable outcome, a spokesman of the Singapore Chemical Industry Council (SCIC) said.

“The emphasis would be on regional competitiveness and more importantly, ensuring a level playing field for the region,” the SCIC spokesman said.

“We perceive that the zero duty would benefit the producers in Singapore. More importantly, it will benefit the plastics industry in ASEAN by strengthening our competitiveness with the other regions of the world,” he added.

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By: Chow Bee Lin
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