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New Brazilian Resin Tariffs on Resin Imports to support Local Producers amid Global Competition
09/19/2024
New Brazilian Resin Tariffs on Resin Imports to support Local Producers amid Global Competition
Brazil's Development, Industry, Commerce and Services Ministry has proposed new import duties for Polyethylene and Polypropylene resins which will soon rise from 12.6% to 20%.
Abiquim, the Brazilian chemical industry association, requested the measure due to strong competition from lower prices for imported material, which pressures local production margins. In total, nearly 30 chemical derivatives face tariff increases under the proposal.
Brazil has historically imposed import tariffs on various Petrochemical products, including Polyethylene (PE) and Polypropylene (PP), to protect its domestic production. These tariffs have fluctuated over time based on trade agreements, market conditions, and economic policies.
Import tariffs on PE and PP in Brazil have generally ranged between 10% and 14%. These tariffs apply to imports from countries that do not have preferential trade agreements with Brazil, like those under Mercosur.
New import duties will take effect following a 15-day period allowing for Mercosur partners to respond to the proposed measure, which will likely see no opposition, so the new tariff levels could become effective in two weeks. The products with these higher tariffs will be monitored monthly and reassessed based on considerations for the best public interest.
Brazil's government trade data shows annual PE imports of approximately 500,000-700,000 tons and 200,000-300,000 tons of PP.
North American supply accounts for nearly 50% of all Polyethylene imported into Brazil. North American PE producers have a feedstock cost advantage from steam cracking Ethane into Ethylene due to abundant supplies from shale gas production.
Saudi Arabia accounts for 15-20% of PE imports to Brazil, while Argentina takes 10-15% of the market share and Mexico closer to 5-10%. Other countries like China, S. Korea and Germany provide the remaining 5-10% of Brazilian PE imports.
US producers also supply the lion's share of Brazilian PP imports, accounting for 30-40% market share; South Korea comes in second with 15-20% and Saudi Arabia carries 10-15%. The EU and Belgium account for another 5-10%, while other countries like China, India and other regional players hold the remaining 10-15% of the import market.
Braskem is the largest producer in Brazil with an annual capacity of over 2 million tons of polyethylene and around 1.4 million tons of polypropylene. Local production predominantly utilizes a more costly naphtha cracking route to produce ethylene and propylene monomer feedstocks.
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