Plastribution Blog // Impact of Tariffs on UK Supply of Polyethylene

As the spectre of rising global trade tensions looms, the UK plastics industry is bracing for significant impacts in the coming months. The European Union is poised to introduce tariffs on a range of US imports starting in April and, unless there is a breakthrough in negotiations, a 25% tariff on imports of US polyethylene (PE) is expected from April 13th. This development could lead to considerable disruption in supply as producers and traders grapple with the implications. In this blog, Plastribution explores how EU tariffs on US polyethylene imports could disrupt the UK plastics supply, impact prices, and reshape trade dynamics.

Understanding Europe’s Dependency on Imports

Europe relies heavily on imports to satisfy its PE requirements, with about 35% of its demand met from abroad. In the last two years, Europe has imported over 3.5 million metric tonnes of PE from the USA, primarily consisting of LLDPE.

European producers might be able to increase output. Plant utilization rates in 2024 were about 10% lower than in 2019, suggesting that there is some capacity to make up for a portion of the imports lost to tariffs.

Europe could seek additional imports from other regions like the Middle East and South Korea, although adjustments will take time. This is compounded by planned maintenance at key plants in the Middle East and potential spikes in freight costs due to increased demand and disruptions in the Red Sea.

The Inevitability of Price Increases

Price increases seem almost inevitable amid these disruptions with the uncertainty of supply adding to the direct cost of tariffs. However, some factors could potentially mitigate this increase.

We are currently in a different scenario compared to the recent price spikes during the COVID-affected period in 2021 and the post-Ukraine invasion in 2022. Moreover, global economic slowdowns, potentially exacerbated by a trade war, could depress demand further. This slowdown could also lead to lower oil prices, thus reducing feedstock costs and potentially moderating polymer prices.

The UK’s Strategic Challenge

Whilst the UK is yet to announce how they will approach tariffs; we will inevitably feel some effects. A potential contentious point could be our relationship with the EU, should our trade policy with the USA diverge from theirs significantly.

The UK-EU TCA has specific provisions to ensure a level playing field:

“Level playing field provisions in trade agreements are there to ensure competition is open and fair and that businesses from one trading partner do not gain a competitive advantage and undercut rivals from another. The TCA has the most extensive provisions seen in any free trade agreement to date.”

If the UK government decide not to impose tariffs, there is the potential for UK prices to fall as we could see far greater levels of imports from the USA upsetting the supply/demand balance. However, this assumes the ships from US ports keep heading this way. Without the demand to go to Antwerp and beyond, we may see fewer ships coming to Felixstowe. There are already rumours that major US producers are halting shipments to Europe and US-based traders are looking at alternative markets for their cargos. Whilst these effects will not be felt just yet, we could see a major supply crisis after Easter.

The UK plastics industry must therefore brace for impact but also view this as an opportunity to reassess and possibly strengthen its supply chain resilience in the face of global market fluctuations.

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