Brazil opens dumping investigation against US, Canada on PE imports

Brazil's government initiated on Nov. 14 a dumping investigation against the US and Canada on polyethylene imports to the country, according to a publication in Brazil's Official Gazette.

The investigation request was made by Braskem, the country's sole PE producer, on July 31, alleging damage to the domestic industry due to a decrease in PE's domestic market and revenue, coinciding with an increase in imports from North America at competitive prices.

Involved parties in the dumping investigation, such as the domestic producer, Brazilian importers and US and Canada producers and exporters, have a 30-day deadline to answer to questions provided by the Brazilian government. The following step consists of a five-month deadline for arranging hearings.

The dumping investigation caught most market participants by surprise; however, rumors on Braskem's request had already been mentioned by traders in previous weeks.

Most importers had doubted a dumping investigation would take place, as the country applied on Oct. 15 an increase in import duties from 12.6% to 20% for polyethylene and several chemicals and polymers. All countries without a free trading agreement with Brazil, including the US and Canada, were affected by the decision.

According to a PE trader in Brazil, applying antidumping tariffs will likely lead to a decrease in imports and an increase in local prices. The source also mentioned a similar process has occurred previously for polypropylene: "We will have to adapt once again. I already know the end of this story."

Currently, Brazil applies antidumping tariffs on the US for PP imports, which was reestablished in February.

Another PP and PE trader said that any restriction on US PE would have a more significant impact on the market than on PP.

"PE has a very large representation in Brazil, greater than PP," the trader said.

According to the source, US products are sold below cost price for Brazilian converters, which could support dumping allegations in this type of investigation request.

"Large converters, with a business volume of over 5,000 mt/month, have significant bargaining power," the source said, adding that US sales have negative margins, leading to competitive offers in the Brazilian market.

Market participants also said PE demand is greater than domestic production, which reinforces expectations of negative impact in the market.

The dumping investigation request filed by Braskem considers import, pricing, and domestic sales data from April 2019 to March 2024. Information provided by the company states that dumping margins from the US during the period are of 21.4%, while Canadian products have a margin close to 27%.

Meanwhile, imports to Brazil from the US and Canada spiked 91.7% in the period, while domestic sales decreased 8.6%. Domestic revenue decreased 4% in the period. Braskem's market share in the domestic market, according to the document, fell to 51.5% in March 2024, in comparison with almost 65% in April 2019.

Most recent data from Brazil's Secretariat of Foreign Trade shows the US figures as the top PE supplier to Brazil from January to October 2024, summing 73% of PE imports, followed by Argentina at 10% and Canada with nearly 7%.

PE imports in the year increased 34% in volume in comparison with the same period of 2023.

Platts, part of S&P Global Commodity Insights, last assessed high-density film polyethylene grade at $910/mt on Nov. 13, the lowest value since July 8 2020, when it was assessed at $890/mt.