Karachi, August 04, 2022: The anti-dumping duty on Poly Vinyl Chloride (PVC) imports imposed by National Tariff commission in 2017 has expired in June this year.
The duty was imposed in the range of 3.44% to 20.47% on imports originating from China, Korea, Thailand and Chinese Taipei.
Now, it is likely to be re-imposed since local PVC industry saves $240 million per annum in import substitution and has now started exporting $24mn worth of PVC every year.
It is to be noted that the local PVC industry is protected by duties since imported PVC is subject to 11% customs duty along 2% additional customs duty besides anti-dumping duty.
The duty protection enables local players to charge a premium and sell their product close to import parity.
In recent years, the amnesty scheme on construction along with subsidized loans for low-cost housing led to healthy pickup in demand for PVC.
Pakistan’s total PVC market is around 250k tons per annum which translates into per capita consumption of 1.2 kg compared to global average of 6 kg per capita.
In the last 10-years, PVC demand in the country has grown at CAGR of 5.1%. Approx. 65%-70% of PVC demand stems from the construction sector in the form of raw material for pipes & fittings, cable compounds, ducts, and flexible hoses.
Moreover, with the introduction of new applications, PVC has been widely deployed in manufacturing of PVC walls & floor panels, composite doors & windows, and decorations alongside woodwork.
EPCL is the sole producer of PVC in Pakistan with annual capacity of 295 k tons and approximately 85-90% market share; while the rest is met via imports.
The company has recently expanded its capacity to fully substitute imports and generate valuable Forex for the country by exporting to USA, Middle East, Europe and Afghanistan.
EPCL has been able to capture the import market since it takes 2-3 months to import while EPCL can deliver its product on immediate basis.
Moreover, increase in international price of PVC along with increase in PVC-ethylene core delta helped margins of local PVC player to expand considerably.
However, with a pause on the subsidized loan scheme and normalization of PVC ethylene core delta due to global slowdown, margins may return to long term average in the future.
Pakistan’s total caustic soda market stands at approximately 400k tons with three main players namely Sitara Chemicals and Ittehad chemicals in the North while Engro Polymer in the South.
Caustic soda is used as a major input in various industries including textiles, soap, detergents, and water treatment. Production of caustic soda requires large amount of electricity thereby; it is significantly impacted by electricity tariff or production cost of electricity.
Moreover, local caustic soda usually sells at a discount to international caustic soda prices. In recent years, caustic soda demand remained robust on account of increased industrial activity as well as focus on textile exports of Pakistan which are expected to cross the US$20bn mark this year.
However, due to economic slowdown in EU and America exports to these regions may take a hit, impacting the market of caustic soda as well. Moreover, due to significant increase in the local cost of production and inflationary pressures, the industrial activity in the country may slowdown.