Closure of downstream plastics factories feared

Published November 12, 2020, 6:00 AM

by Bernie Cahiles-Magkilat

Domestic downstream plastic products manufacturers have raised alarm over serious threats of factory closures due to supply constraints of their raw materials.

The Philippine Plastics Industry Association’s (PPIA) issued this warning as it continued to fight against the petition by JG Summit Petrochemical Corp. (JGSPC), the country’s lone producer of their raw materials high-density polyethylene (HDPE) and linear low-density polyethylene (LLDPE) pellets and granules LLPE and HDPE resins, for the government to impose a safeguard duty of P15,000 per metric ton on the importation of these products.

PPIA President Danny Ngo alleged in a statement that the Gokongwei-owned JGSPC has not fulfilled its October-November supply commitments.

Ngo lamented that this situation comes at a time when the industry is slowly recovering from the COVID 19 pandemic crisis with low market demand and manufacturing challenges brought about by the lack of infrastructure and public transport system.

“The Philippines’ national plastic manufacturers are at severe threat of factory closure with lack of raw material supplies. The plastic industry is of significant national interest, with multiple industries now utilizing and depending on plastic materials for their products,” said Ngo.

“With JSGPC being the sole domestic supplier, there will not be enough time for the local manufacturers to import their raw material needs to keep the factories running and we will have no choice but to shut down.  Our buffer stocks for both raw materials and finished goods are at an all time low due to lack of financial capacity.  Our workers were looking forward to report back and save enough for the upcoming holidays and we need the business to enable us to fulfill our obligation to pay them their 13th month pay.” 

In its statement, the group urged the Department of Trade and Industry and the Tariff Commission not to grant the protection and safeguard tariffs being sought by JGSPC as it will place the hundreds of domestic downstream manufacturing players at a big disadvantage.

PPIA stressed that should the government continue to grant the safeguard tariffs, finished products will flood the market with cheaper cost of production overseas and lower duty rates. Thus, effectively stifling the local production.

PPIA recognizes that some countries may have lower production cost and prices, possibly through significant incentives, subsidies, and support by their governments designed to bolster their  position for exports.

As the official plastics industry group in the country, the groups enjoins the government and relevant organizations to unite and engage in capacity building and development to reduce our reliance on foreign products. 

PPIA raises their concern to the Philippine government that should domestic industries be forced to close, “Our increasing reliance on foreign products may place the country in a difficult position should geopolitical tensions arise.”

PPIA further pointed out that the P15,000 per metric ton safeguard measure sought by JGSPC is equivalent to 30 percent tariff imposed on the raw materials and will translate to a 15-20 percent additional cost for packaging material and finished goods. This will put the local downstream manufacturing and converting industry at a gross disadvantage and drive markets to cheaper imports.

Not only will the imports be in the form of plastic products or packaging, but this will result in the importation of finished consumer goods products.

As it is, PPIA said a big majority of consumer goods like personal care and food products are already imported, especially those where the volumes are high and this can be attributed in high cost of production and raw materials in the Philippines.  Adding a safeguard tariff on HDPE and LLDPE raw materials will result to further losses of market to local businesses. This will result in an import surge of Plastic Finished Products and Finished Goods.

HDPE is the material used to make plastic bottles for alcohol, disinfectants, soaps and detergents. It is also used to make plastic bags and packaging materials. LLDPE is mostly used for the packaging of food.

 
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