RCEP to boost Asia-Pacific polymer trade; will global PP, PE trade flows change?

The Regional Comprehensive Economic Partnership (RCEP) free-trade agreement (FTA) was signed over the weekend by China, South Korea, Japan, New Zealand, Australia and all ten members of ASEAN.

Without doubt, the deal will boost polymer trade among Asia-Pacific nations as it aims to reduce or eliminate import tariffs in the 15 nations gradually over the next two decades.

For PP and PE, the reduction or elimination of tariffs vary across product grades and countries.

“Interest for deep sea cargoes may fade amid reduced tariffs and shorter shipment times,” players noted.

Now the important question is how this mega-pact will affect global trade patterns for polyolefins over the medium to long-term, particularly because it involves China - the largest PP and PE consumer in the world.

New ASEAN capacities likely to head to China

According to ChemOrbis Import Statistics data, China’s largest PE suppliers have mostly been non-RCEP members for long years. Saudi Arabia, Iran and the United Arab Emirates currently have the largest market share for HDPE in the country.

Last year, the United States became the third largest LDPE supplier to China, following Iran and Saudi Arabia. As for LLDPE, Saudi Arabia, Singapore and Thailand have been standing at the top of the list for years.

China’s largest homo-PP supplier has been South Korea, a RCEP member, since ChemOrbis began keeping records in 2000. Still, the second largest supplier is once again Saudi Arabia.

With the RCEP deal coming at a time when huge capacity additions are around the corner in Southeast Asia, it would be no surprise to see more ASEAN origin PP and PE in China in the upcoming years.

“Polymer imports from the Middle East, the US and India are subject to import tariffs of around 6.5% in China. Once the RCEP deal comes into effect, these regular polymer suppliers may lose their attractiveness amid lack of tariff privileges,” commented a few players in Asia.

The Pengerang Refining and Petrochemical (RRefCHem) complex in Malaysia is gearing up for start-up in the first half of 2021. The complex includes a 350,000 tons/year LLDPE unit, a 400,000 tons/year HDPE unit, and a 900,000 tons/year PP unit.