Brazil approves raising import taxes for chemicals, polymers by up to 20%

Brazil's Chamber of Foreign Trade approved Sept. 18 an increase in import taxes for 29 chemical products, three of them with lower rates than those suggested by the sector. The chamber also rejected sector requests for adjustments on 33 more products.

"The 29 products had rates ranging from 7.2% to 12.6%, which will be increased to 12.6% to 20% for a period of 12 months," it said.

When asked about the deadline for the new rates to come into effect, the chamber said that "the decision is forwarded to Mercosur partners, who have 15 days to respond."

If there is no opposition, the resolution will be published in the Official Gazette and become effective.

Affected products

Import duties for polypropylene, polyethylene and PVC were increased from 12.6% to 20%. Expandable polystyrene import tax was raised from 12.6% to 18%, while import duties for other chemicals from the upstream industry, such as styrene, adipic acid and monoethanolamine, were also increased.

Import duties for polyethylene terephthalate were also raised from 12.6% to 20%. PET recyclers have been closely monitoring this request, as prices for post-consumer PET bales have reached record highs, while virgin resin imports from Southeast Asia remain competitively priced. The higher import tax could raise domestic prices for virgin PET resin, enabling recyclers to also increase flake prices, according to sources.

Market scenario

Abiquim, the association that represents local chemical industry producers, requested the tariff increase amid competition from cheap import prices.

After the approval, Abiplast, the association that represents the plastic industry, said that the measure would have "harmful impacts."

The government said that the products with higher tariffs "will be monitored on a monthly basis and that they may be reassessed at any time based on public interest considerations."

Market participants said that the increase is aimed at benefiting local producers. Main domestic producer Braskem, which has lost market share throughout the year, would benefit from the tariffs, the sources said. From Sept. 12-Sept. 18, the company's shares rose 9.5% in Brazil's stock exchange, as investors anticipated the tariff increase would be approved.

Since January, prices of domestic polymers have been less competitive than imports, leading to an increase in imports in 2024 and a decrease in exports.

This price scenario intensified in recent months. From July 1 to Aug. 21, CFR Brazil PVC prices, assessed by Platts, part of S&P Global Commodity Insights, have dropped by $90, from $940 per metric ton to $850/t. Meanwhile, domestic Brazilian prices have increased from Real 8,000/t to Real 8,300/t (from $1,400/t to $1,524/t, including exchange variation) in the same period, according to sources.

On Sept. 18, Platts assessed import PVC prices at $830/t CFR Brazil. On the same week, domestic prices were heard at Real 5.750/t, or $1,042/t, not including taxes.

The tariff increase was first requested by Abiquim in March.

In recent months, expectations regarding approval have affected prices of several products. For PVC, PP and PE, for example, traders said that importers had postponed purchases, fearing they would have to pay higher tariffs for the product, which in turn impacted their demand.