Troubles for the Downstream Industries of Polyethylene in Europe

The recent exclusion of many countries from Europe?s General System of Preferences (GSP), lead to a hike in the import duty of chemicals from those countries to 6.5% from 3%. Among the excluded nations were many Middle East nations. The hike in import duty seems to be a cause of concern for the European polyethylene (PE) importers, as the continent largely depends on imports for around one fifth of its total PE needs.

Adding fuel to this is the high price of domestic polyethylene, which results from the cost disadvantageous feedstock, reduced operating rates and the recent plant closures in the Europe. Technically, more the import restrictions, the more will be the raw material costs for the downstream industries such as packaging, building and construction, food products and consumer products industries, who until recently benefited by the cheap polyethylene imports from the Middle East.

But will the import hike really bring a significant harm to the downstream industries? The paper discusses the European PE market, its import dependence, possibility of decline in the import volumes from the Middle East, possibility of increase in import prices and suggests strategies to boost the competitiveness of the downstream industries.

Exclusion of many countries from the EU's General System of Preferences (GSP):

From 1 January 2014, the European Union's General System of Preferences (GSP) eliminated many high income and upper-middle income countries and limited the number of beneficiary countries to 87 from 176. The excluded countries will no more enjoy a preferential duty rate.

Among the excluded countries were many from the Middle East region such as Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab Emirates, Oman, Iran and Azerbaijan.

Following the changes in GSP regime, EU raised tariff on imports of chemicals from ME from 3% to 6.5% from 1 January 2014.