SABIC resolves VAT issues on S Africa polyethylene exports

24 January 2012 13:27  [Source: ICIS news]

LONDON (ICIS)--Saudi Arabia-based chemicals producer SABIC has successfully concluded its negotiations with South African local authorities on Value Added Tax (VAT) payments for its polyethylene (PE) exports into the country, a company source said on Tuesday.

"We have completely resolved our VAT issues in South Africa," the source said, but declined to elaborate further.

The producer had resumed shipments into South Africa in the second half of December last year after suspending them in November on concerns over tax changes in the country.

In a letter to customers dated 9 November, SABIC said it was suspending its PE shipments on accounting concerns over the replacement of import duty with VAT for PE imports into South Africa, starting from 1 January 2012.

Demand for PE imports in South Africa is currently high, as the country is experiencing supply shortages from major domestic producers Sasol and Safripol.

"We are selling from our warehouse. We have already increased our volumes to South Africa and we do expect to remain at the same levels," the source added.

PE has been short in the South Africa market for most of the second half of 2011, but became seen as acutely tight in the fourth quarter when Sasol issued a letter to customers stating that its supply shortage is going to last at least until March 2012.

Prices from distributors of imported product, including those of SABIC, have consequently increased sharply since then.

Prices for linear low density PE (LLDPE) in South Africa are currently at South African rand (R) 12,400-13,600/tonne ($1,564-1,715/tonne) FD (free delivered), while high density PE (HDPE) is selling at R12,800-13,300/tonne FD.

Local producer Sasol has kept its offers at a rollover for February, despite the supply shortage.

($1 = R7.93)

For more on polyethylene visit ICIS chemical intelligence

By: Cuckoo James
+44 (0) 208 652 3214

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