EUSFTA opens doors for Singapore polymers

Europe could emerge as a more attractive market for Singapore-origin polymers once the two regions formalise a new trade agreement, although stiff competition, high freight rates and long voyage times may act as deterrents.

The EU this week voted in favour of the EU-Singapore Free Trade Agreement (EUSFTA), paving the way for formal ratification.

Among other things, the EUSFTA will allow chemicals and polymers from southeast Asian countries and used to manufacture product in Singapore for export to qualify as local content. This means Singapore-based polymer producers will be able to sell to the EU at reduced or no tariffs. EU import tariffs on polymers such as polyethylene (PE) and polypropylene (PP) are currently 6.5pc. Equivalent Singapore tariffs are set at zero.

Key challenges for Singapore-based polymer producers would be freight rates and the voyage times required to move polymer product to the EU. Voyage times are around three weeks, depending on final port and destination; freight rates between Singapore and north Europe are relatively expensive at around $800/TEU.

Singapore-based producers would also have to compete with their peers in Europe, who sell products into the bloc on both contract and spot basis. For some of the major polymer producers with operations in Singapore and Europe it will be more about optimising global supply chains than competing for market share. European producers are already established in producing sophisticated polymers and polymer blends for more advanced segments such as the automotive and pharmaceutical industries.

Polymer trade flows from Singapore will also face challenges from the feedstock-advantaged supplies from the Middle East and US suppliers that are import sources of bulk product, regardless of tariffs.

Before gaining access to the EU, all Singapore-origin polymer producers will need to ensure their co-monomers and feedstock olefins are compliant with the the EU's REACH regulation, which is designed to improve human health and the environment from risks posed by chemicals.

Singapore, a key trading hub in southeast Asia, was most recently a signatory of another FTA: the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Effective December 30 last year, the CPTPP will allow Singapore direct market access to countries like Australia, Canada, Japan, Mexico and New Zealand. Singapore is also part of the Association of Southeast Asian Nations (ASEAN) FTA, which allows it to sell to neighbouring countries at reduced tariffs.

The EU has around 70 existing trade deals and most recently agreed FTAs with Japan, south Korea and Canada.