Brazil polymers, chem import tax hike begins

: Petrochemicals
24/10/15

Brazil's import tax increase on a number of polymers and chemicals to 20pc from 12.6pc, including polyethylene (PE), polypropylene (PP) and polyvinyl chloride (PVC), has gone into effect.

The new import tax rate was effective on 15 October and is valid for 12 months, according to Gecex, the Brazilian committee for commercial trade management.

A PVC plastic converter with operations across Latin America told Argus that although the tax increase only started today, Brazilian polymers producers already raised prices by 5-6pc since the end of September. PVC import prices into Brazil, with the exception of those originating from the US, also followed suit last week, the source said.

Higher prices are expected in Brazil despite stable PVC demand. Furthermore, maritime logistics difficulties at ports in southern Brazilcontinue and there is concern they will worsen as the end of the year approaches, putting more pressure on plastic resins prices. The major port of Navegantes is currently undergoing an expansion project that has created delays at that port and surrounding ports.

US traders said that the increase in Brazilian import taxes is likely to lead to at least a short-term decline in US exports to Brazil.

"I think short term, over one to two months, [the higher taxes] will deter imports," said one US trader. "[Brazilian polymers producer] Braskem will take advantage and increase the price… and then customers will buy anyway at the new price level."

During that short period, there will be increased availability of US product for other regions, according to another US trader.

"Big volumes will need to go elsewhere," said the trader. "Maybe elsewhere in South America, maybe other regions."

Domestic manufacturers and chemical industry associations welcomed the decision when it was first announced on 18 September. Brazil's chemical industry association Abiquim has been asking the government to provide commercial protections for 62 products since May.

But critics of the tax hikes say they will increase costs for consumers and manufacturers who rely on imported polymers and chemicals.

Brazil's plastic industry association Abiplast said in September it was concerned that the higher import taxes will increase production costs for plastic products, which could result in higher prices for end consumers.

The Brazilian chemical industry is responsible for around 11pc of Brazil's GDP, according to Abiquim.

By Fred Fernandes and Michelle Klump

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