Vietnam’s polyolefin puzzle: Market holds breath amid VAT shift and US tariff hike

Vietnam’s PP and PE markets have begun showing subtle shifts amid recent policy changes. Local PP prices remained steady last week, supported by tight supply and seasonal slowdowns, while PE values edged slightly higher, though met with buyer resistance. This week, market sentiment is starting to turn as new tax policies and international trade measures enter the picture.

VAT cut offers psychological lift, but fails to boost real demand

Despite a VAT reduction from 10% to 8% effective July 1, the market has yet to feel a meaningful boost in activity. Most players report that the tax cut has had limited impact on sentiment or pricing, citing deeper-rooted issues such as ongoing demand weakness, regulatory hurdles, and macroeconomic challenges.

Several local traders and buyers noted that PE film prices dipped slightly by VND200,000-300,000/ton ($7-11/ton) though the VAT cut wasn’t the primary reason. A persistent downtrend fear and sluggish end-user consumption continue to weigh heavily. Some small businesses have shuttered operations, unable to meet new documentation requirements, particularly proof of origin. As a result, many converters have taken a "wait-and-see" stance, wary of committing amid such policy-related disruptions.

Local PP and PE prices were mostly flat to slightly softer this week. While tight domestic supply offered some support, import offers have created downward pressure. Locally-held cargoes from suppliers like Russia and the US were reportedly up to VND1,000,000/ton ($39/ton) lower than offers from Middle Eastern suppliers, which remain limited in availability. Although there are some early signs of demand improvement, especially tied to increased Chinese investment in Vietnam, most market participants remain cautious, waiting for more stability before making aggressive purchases.

US tariff adds uncertainty, but may offer competitive openings

The US decision to raise tariffs on Vietnamese goods from 10% to 20% has drawn mixed reactions in the market. While initial concerns about reduced competitiveness were widespread, some traders now view the development as a potential opportunity.

Several Vietnamese players believe the increased US tariff—although initially seen as a barrier—could position Vietnam as a more attractive supplier in comparison to other Southeast Asian countries facing higher trade levies. One trader noted that despite the 20% rate, Vietnam’s exports remain competitively priced, which might stimulate demand once the dust settles.

However, others remain wary, fearing continued US policy fluctuations could trigger more market instability. "We prefer to stay on standby," said one trader, echoing the broader sentiment.

Players believe that Vietnam’s polyolefin markets may slow briefly as businesses adjust to new corporate tax and billing policies. Yet, as domestic supply rises, particularly with the anticipated return of Long Son Petrochemical and new import arrivals in August, downward pressure on prices is likely to resume.