FocusS Korea PE, PP makers to gain from EU, Korea free trade pact

12 July 2011 08:10  [Source: ICIS news]

By Chow Bee Lin

HDPE bottles Photo: Rex Features/OjoSINGAPORE (ICIS)--South Korean polyethylene (PE) and polypropylene (PP) producers stand to gain a bigger market share in the EU under the free trade agreement (FTA) that took effect on 1 July, industry sources said on Tuesday.

“Korean PE and PP producers have net export positions and are already exporting to the EU. They’ll gain bigger shares of the EU markets now that they are exempted from duty under the FTA,” said Injae Lee, a senior analyst at KB Investment & Securities.

South Korean PE and PP exports to the EU were subject to a 6.5% import tariff before the FTA was implemented.

Some European and Japanese trading companies have started enquiring on Korean yarn and block-copolymer grade PP for their customers in the EU, a source at Honam Petrochemical said.

Despite the duty exemption, Korean producers will still face stiff competition in the EU markets from Middle East producers, said a second source at Honam Petrochemical

“EU buyers compare our material with Middle Eastern cargoes. But we cannot compete with Middle Eastern producers [on prices],” said the second source from Honam.

The benchmark film-grade high density PE (HDPE) from South Korea was offered at $1,550/tonne (€1,101/tonne) CFR (cost & freight) western Europe last week for July shipment, which is $160/tonne higher than the landed price of Middle Eastern cargoes, the second source from Honam said.

Film-grade HDPE from the Middle East was offered at $1,350/tonne CFR western Europe last week for July shipment, which yields a landed price of $1,390/tonne after taking into account a 3% import duty, he said.

Producers in the Middle East can afford to export their cargoes to the EU at much lower prices because their feedstock costs are lower, he added.

However, South Korean producers can still benefit from the FTA if they avoid head-on competition with Middle Eastern producers in the commodity resin markets and focus on exporting premium products to the EU, a source at LG Chem said.

LG Chem will be exporting more premium products such as metallocene linear low density PE (MLLDPE) and HPDE cap grades to the EU, taking advantage of the duty exemption, he said.

($1 = €0.71)

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By: Chow Bee Lin
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