Brazil reduces PE, PP, PVC import tariffs until December 2022

March 02,2023

Brazil Reduces pe pp pvc Import Tariffs

Up until December 2022, Brazil will lower its import taxes on polyethylene (PE) and polypropylene (PP) plastics. Given the recent sharp increases in resin prices, it is anticipated that these steps will benefit the local sector.

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Increased Demand

Polyethylene, polypropylene, and PVC are still in high demand in Brazil's home market. Several things have led to this, including government initiatives and an increase in consumers. This raises demand for a range of goods created from these polymers, including furniture, styrofoam, and plastic bags.

Brazil's economy is anticipated to keep growing quickly, contributing to the country's ability to sustain robust demand for PE and PP in 2022. The increase in the number of middle-class consumers will increase demand for these goods.

Brazil has decided to lower its import duties until December 2022 in response to the rising demand for these goods. The quota for imports of suspension polyethylene resin was expanded by 160,000 tons, while the import duty on PE, PP, and PVC was decreased to 4%.

This is encouraging for the Brazilian petrochemical sector because it will enable the business to satisfy the rising demand for these goods. Additionally, the move to lower these import taxes will enable businesses to invest profitably in the nation.

In the upcoming years, the Brazilian petrochemical industry is anticipated to expand rapidly. Increased funding for infrastructure projects like roads and airports will be advantageous for it. A significant factor in the growth of this industry is also the nation's ambitions to invest in energy and sanitation projects.

The government's programs in Brazil to lower carbon emissions will also increase demand for these goods. Demand for these items will rise as a result of the shale gas revolution as well as the expansion of the oil and gas sector.

Up until December 2022, the Brazilian government has announced a reduction in import taxes on polyethylene, polypropylene, and PVC. The decision was made in response to a number of issues, including the increasing cost of certain goods. These items are now valued at about USD 750 per ton. In comparison to earlier costs, this represents a huge decrease.

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Reduced Supply

Recently, the Brazilian government announced a temporary lowering of import taxes on polypropylene (PP), the second most used plastic in the world after polyethylene (PE). The nation has never previously made a choice of this nature. The supply of PP is anticipated to grow, and prices, which have been climbing quickly over the previous few months, are anticipated to stabilize.

The Brazilian government is getting ready to roll out new rules for building and infrastructure, which should improve market conditions for plastic resin. The nation is the biggest producer and consumer of plastic resins in Latin America, but demand has been suppressed for years, in part because of a lack of investment in the industries that purchase PVC.

The country's economy is still expanding, with 2023 GDP growth expected to reach 1.7%. The government intends to implement new measures for infrastructure and building, including an increase in investments in the PVC-buying industry, in order to spur growth.

Brazil's domestic PP manufacturing capacity is projected to rise dramatically with these regulations in place. The domestic markets, which are already seeing lower pricing for polyethylene, will benefit from more competitive PP prices as a result of this increase in output.

Brazil's exporters will also profit from the temporary drop in import duties because they are now more competitive as the currency appreciates. Braskem, the largest thermoplastic resin exporter in the nation, will be better able to compete with Latin American companies on the global market.

BAK's upcoming introduction of green polypropylene, which will be made using sugarcane ethanol rather than petroleum, is another advantage. Similar to conventional polypropylene in terms of technical processability and performance, but more environmentally friendly.

It is predicted that 2.3 tons of CO2 will be collected and sequestered for every metric ton of green polypropylene. In addition to LDPE and HDPE, this product will be a significant addition to Braskem's line of biopolymers.

With a new plant that will begin operating in January 2014, Braskem will increase its LDPE and HDPE capacity in addition to the new green PE. The company's current 200,000 tons per year of LDPE and HDPE production capacity is anticipated to double as a result of this. Braskem will need to increase output in order to keep holding the top spot in the biopolymer industry.

Increased Prices

Brazil has decided to lower its import duties on polyethylene (PE), polypropylene (PP), and polyvinyl chloride (PVC) through December 2022 despite the uncertain future for the petrochemical market. This statement is probably going to improve supply activity and market mood in the Brazilian petrochemicals market.

The cost of PP on the Brazilian market has been rising recently, and this trend is anticipated to continue. This product offers amazing properties like stiffness, high impact resistance, flexibility, and light weight, making it a commonly used material in the packaging business.

Additionally, it is widely utilized in the production of vehicles, agri-chemicals, and other industrial products. However, due to its low production volume, it is only occasionally available on the domestic market. This has caused shortages in a number of downstream sectors and an increase in price for this product on the local market.

A number of different variables have combined to cause this price hike. The first is Brazil's deteriorating economic situation, and the second is the recent strengthening of the US currency against the Brazilian real.

The increased bids for raw materials are another factor contributing to this price increase. Lower profitability and higher production costs are the results of this.

In the meantime, the US PE market has been in a rut for a long. Both the continued shipping issues and the sluggish economy are to blame for this.

Despite these difficulties, the US was nonetheless able to grow exports in the first quarter of this year. A million tons of PE were exported from the nation to Asia and Africa.

While exports rose as a result, the nation lost some of its key customers, including China and Pakistan. Additionally, there was a considerable decline in US PE shipments to Jordan and Egypt.

Production of Caustic soda, an inorganic substance used to make pulp and paper, textiles, drinking water, soaps and detergents, and drain cleaners, is another aspect of the company's operations. Ethylene, polyethylene, and polypropylene resins are also produced there.

Temporary Reduction

Until December 2022, Brazil's government will lower import taxes on resins made of polyethylene (PE), polypropylene (PP), and PVC. This is consistent with recent government policy declarations by Brazil to lessen trade protection for a range of goods and services.

The goal of lowering these import duties is to increase demand for these goods and boost manufacturing. As a result, businesses will be able to employ a larger proportion of foreign intermediate materials, improving their ability to compete on the global market and their own productivity while simultaneously benefiting Brazilian consumers by lowering the price of finished goods.

However, there are still a lot of issues that will need to be taken into account, and the effect of this policy is not certain. This includes the persistent fall in domestic production in Brazil.

Given that the increased output is anticipated to decrease the supply of the propylene monomer on the Brazilian market, which would in turn raise the cost of producing these resins, this could negatively affect the supply of PE and PP. Additionally, it is anticipated that the US PE and PP price alignment would persist, exerting pressure on spot prices.

Additionally, the petrochemical industry, which has already faced numerous difficulties over the past few years, will continue to be impacted by the drop in oil prices. As a result, producers might be obliged to restrict their output and look for ways to cut costs, which could result in a further drop in the price of polyethylene and polypropylene.

The Brazilian ethylene industry may find it more challenging to obtain this input as a result of the monomer propylene's price drop, which will further reduce production and tighten supply. As a result, Brazilian ethylene producers must be proactive in winning contracts and increasing ethylene supplies.

An important policy choice that will significantly affect the economy of Brazil is the temporary decrease of import tariffs on key petrochemical products. It will enable businesses to employ a larger proportion and more effectively of foreign intermediate materials, enhancing their ability to compete on the global market and their own productivity, while also benefiting Brazilian consumers by lowering the price of finished goods.