Trade Panel Weighs End Of Plastic Duties As Prices Rise

Set up to protect petrochemical companies along the Gulf Coast from cheap plastic resin sold by foreign manufacturers, rights to a type of plastic known as polyethylene terephthalate or PET are being challenged by beverage makers , who claim they struggle to make a profit due to the high cost of producing their bottles.

Plastic prices have risen steadily over the past year as the global pandemic disrupted supply chains and spiked prices for everything from coffee to computer chips. PET resin, which is used in beverage containers and other packaging and targeted by tariffs, is selling almost 50% more than a year ago.

“Everyone’s in trouble,” said Joe Doss, president of the International Bottled Water Association. “It’s a very low margin business and the costs are not necessarily fully passed on.

There is a debate about the extent to which US tariffs, which apply to imports from China, India, Oman and Canada, contribute to the rise in prices.

Shipping prices from Asia to the United States have more than quadrupled, and a series of hurricanes and the winter storm in February hit plastics makers along the Gulf Coast particularly hard, said Alexandra Tennant. , analyst at the research firm Wood Mackenzie. Meanwhile, the demand for plastic packaging is increasing as consumers receive more products shipped to their homes.

“The markets are tight around the world and everyone is competing for resin,” she said.

The International Trade Commission is due to review the trade case at the end of January. A spokesperson declined to comment.

Last year the commission decided not to waive duties on another form of PET from China and the United Arab Emirates, holding that this “would likely lead to the continuation or recurrence of material injury”.

The rights have divided the US plastics industry, with companies that produce PET resin benefiting from soaring prices while companies that buy the resin to make plastic products have seen their profits decline.

The American Chemistry Council and the National Association of PET Container Resources, which represent plastics and chemicals companies, declined to comment.

The fight over tariffs, which in the case of Chinese resin adds nearly 180% to the price, parallels a major expansion of the U.S. plastics industry, fueled by a more than decade-long increase in the price of national production of natural gas. Natural gas and its components, such as ethane, are raw materials for plastics and petrochemicals.

Exxon Mobil just built a $ 7 billion plastic plant outside Corpus Christi, while French energy giant TotalEnergies, Canadian company NOVA Chemicals and German chemicals maker Borealis built a new factory in Pasadena with production capacity more than 1 million tonnes of polyethylene per year.

But the change in consumer behavior brought on by the pandemic has increased demand for plastic much faster than anyone expected.

“They expected a smoother increase over the next decade,” said Ashish Chitalia, another Wood Mackenzie analyst. “Usually there is a balance in the industry, but due to major issues with trade, we have this imbalance. “

What water and soft drink manufacturers are banking on is that the recent surge in plastic prices, at a time of widespread inflation across the economy, will prompt trade regulators to step in and to waive rights.

This could leave domestic plastic resin manufacturers along the Gulf Coast facing increased imports from overseas, potentially slowing the region’s petrochemical boom.

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