After piling up a cumulative P9.4 billion losses in the last two and a half years, ultra bilyonaryo Lance Gokongwei’s petrochemical business is expected to get a much needed boost from President Bongbong Marcos.
Gokongwei has finally obtained the tariff shield JG Summit Olefins Corp. (JGSOC) needed to keep up with rival imports after getting shunned by the Duterte administration.
The Department of Trade and Industry slapped a three-year safeguard duty on imports of high density polyethylene pellets (HDPE) pellets and granules to protect JGSOC from the flood of cheap imports.
JG Olefins, the country’s only producer of HDPE, lost P5.2 billion in the first half this year after piling up losses of P2.1 billion in 2021 and P2 billion in 2020.
It blamed higher naphtha costs (up 55 percent year on year to $847 per metric ton in 2022). higher interest expense and foreign exchange loss due to the depreciation of the peso.
The company shut down its plant since the last week of May 2022 due to high customer inventories and weak overall demand both locally and overseas.
“As with several petrochemical companies in the region, bearish margins have prompted a number of manufacturers to similarly cut output or progress maintenance shutdowns in an effort to manage inventory levels. Plant operations are planned to resume within the third quarter of 2022, as customer inventories start to thin out, but the company remains cautious as commodity prices continue to be weak with the global recession sentiment,” JG Olefins said.
JG Olefins petitioned the DTI for a safeguard duty last year, citing the rising share of HDPE imports from Malaysia, Thailand, Singapore, and Indonesia in the domestic market from 36 percent in 2015 to as high as 67 percent in 2019.
Based on the recommendation of the Tariff Commission, the safeguard duty of P1,338 per MT in the first year, P1,271 per MT in the second year, and P1,208 per MT in the third year were imposed due to a spike in HDPE imports in 2021 which it believed showed “a high likelihood that substantially increased imports will continue into the near future.”
HDPE is used in making food and beverage containers, cleaning product bottles, pipes, cutting boards and some shoe parts.
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