Price and market trends: Vietnam mulls 3% PP import tariff; Mideast, India to take hits

21 June 2013 10:01  [Source: ICB]

Polymer convertors oppose the move, claiming that it will cause supply shortages in the country

Vietnam is looking at introducing a 3% duty on polypropylene (PP) imports, raising concerns among domestic converters of a potential supply shortage as the country is a net importer of the polymer, industry sources said on 13 June.

The Vietnam Plastics Association (VPA) is opposing the proposal, which is just pending clearance from the legislature before being implemented, a source close to the association said.

"It's better for local processors if the duty is not imposed, as it will only create a shortage and cause PP prices to rise," the source said.

"The proposal [for 3% tariff] has been mooted by the Ministry of Finance and will need to be cleared by the legislature before an official announcement is made," he said.

In 2012, Vietnam's PP consumption totalled 750,000 tonnes, about five times its production capacity of 150,000 tonnes/year, industry sources said.

Binh Son Refinery (BSR) is the sole PP producer in Vietnam with a plant located in Dung Quat industrial park in Quang Ngai province. The company is a subsidiary of state-owned oil firm PetroVietnam.

India and the Middle East will be hit by the proposed tariff as they account for a combined 40% of Vietnam's PP imports, industry sources said.

Prices of raffia-grade PP imports into Vietnam were assessed at $1,460-1,470/tonne (€1,095-1,103/tonne) CFR (cost and freight) Vietnam in the week ended 7 June, ICIS data showed.

For the rest of southeast Asia that are not subject to import duty, prices stood at $1,500-1,510/tonne CFR SE Asia, according to ICIS data.

"Currently, cargoes from the Middle East are in high demand as they are priced around $30-50/tonne lower than cargoes of southeast Asian origin," a market source said. Middle East exporters were not immediately available for comment.

The proposed tariff in Vietnam will make Indian cargoes uncompetitive, said an India-based exporter.

"Obviously, the [Vietnamese] government is looking to expand local PP capacity and protect investors in the Vietnamese PP sector, but it could force Indian and Middle East suppliers out of that market," a source close to an Indian supplier said.

Vietnam will have a second PP plant, with a capacity of 370,000 tonnes/year at Nghi Son, that is slated to come on stream in 2016.

Notwithstanding its small existing domestic capacity, Vietnam also exports around 10% of its total PP output for better price realisation, according to industry sources.

Imposing a PP import duty will help keep this potential export volume within Vietnam to cater to domestic needs, while imports from neighbouring Asian countries will likely increase, industry sources said.

PP suppliers from southeast Asia, China and South Korea are exempted from any import tariff that Vietnam may impose as per the Free Trade Agreements (FTAs) among the Association of Southeast Asian Nations (ASEAN) members, and between the ASEAN and China/South Korea, an Indonesian trader said.

"Thailand will be most benefitted, as it has the maximum PP export availability. Indonesia and Malaysia do not have much PP surplus to export," the trader said.

By: Prema Viswanathan
+65 6780 4359

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