Deputy Prime Minister Tran Hong Ha meets to resolve difficulties for 2 billion-dollar "super projects" in Ba Ria

The two projects "Polypropylene Production Plant and Underground LPG Storage" of Hyosung Vina Chemical Company Limited with a total investment of 1.67 billion USD and the "Southern Petrochemical Complex" project of Long Son Petrochemical Company Limited (LSP) with a total investment of 5.3 billion USD, are currently facing many difficulties that need to be resolved.

Deputy Prime Minister Tran Hong Ha directed relevant ministries to continue studying proposals from businesses to ensure proper implementation of regulations. Photo: Manh Cuong

Reporting at the working session of the Deputy Prime Minister, a representative of Hyosung Vina said that the project "Polypropylene Production Plant and Underground LPG Storage" of Hyosung Vina has a total registered investment capital of 1.67 billion USD. By the end of 2021, Hyosung Vina had put all the works of the project into operation with an average output of Polypropylene (PP) resin of about 550,000 tons/year.

Since the Project was put into operation, the company has been continuously losing money. As of June 30, 2024, the accumulated loss was 636,876,934 USD, because the input material for the Project is LPG (Propan accounts for 67% of PP production costs) and must be imported entirely.

World oil prices have increased sharply in recent years due to the Russia-Ukraine war and instability in the Middle East, pushing up PP prices while the company cannot increase domestic and export PP prices accordingly;

Hyosung Vina's PP products have to compete fiercely with imported PP into Vietnam at cheap prices, without import tax. Therefore, Hyosung Vina's PP selling price is not good, causing losses.

According to Hyosung Vina, in recent years, implementing trade agreements with many countries, Vietnam has removed import tariff barriers on PP products. Therefore, cheap PP from the Middle East and Northeast Asia including China and Korea has been imported into Vietnam in large quantities. In this situation, Hyosung Vina still has to maintain production and business to retain customers and employees.

Therefore, Hyosung Vina recommends that the Government increase some import taxes related to the products the company is producing as well as erect tariff barriers on PP from Northeast Asia, especially China and Korea, to protect and ensure the survival of the domestic petrochemical industry.

Mr. Nguyen Van Tho - Chairman of the People's Committee of Ba Ria - Vung Tau province said that the two projects put into operation have initially formed a new industry "Petrochemical Industry" of the local economy. Photo: Manh Cuong

The "Southern Petrochemical Complex" project of Long Son Petrochemical Company Limited (LSP) with a total investment of 5.3 billion USD, has just started commercial operation since the beginning of October 2024. However, due to the prolonged recession, the industry's gross profit margin has significantly decreased, the difference between the price of PE/PP resin products and the price of naphtha raw materials has dropped below 300 USD/ton, the lowest level in the past 30 years.

According to LSP, current product prices are not enough to cover production costs, leading to LSP and many other manufacturers experiencing negative operating margins (this unprecedented situation is expected to continue for the next few years). Due to the continuous losses, LSP said it was forced to suspend operations to preserve liquidity.

According to LSP, currently, except for Vietnam, other Asian countries have applied tariff policies on PE and PP resins imported from countries without free trade agreements, especially from regions with cheaper input costs such as the Middle East and the US. India and Indonesia have introduced non-tariff protection measures, import certification and quotas, in compliance with WTO regulations, to protect their petrochemical industries.

“In addition, all Asian countries exempt import duties on key feedstocks and energy, such as naphtha, propane, ethane and LNG, when used for value-added domestic production, ensuring competitive costs for their domestic petrochemical industries,” the LSP representative shared.

In this context, LSP hopes that the Government will reconsider and apply the 10% MEN import tax rate on PE and PP plastic resin products and quickly establish mechanisms to protect the domestic petrochemical industry from significant losses and the risk of bankruptcy.

At the meeting, the leaders of Ba Ria - Vung Tau province said that the two projects put into operation have initially formed a new industry "Petrochemical Industry" of the local economy, contributing to job creation, ensuring social security and developing the local economy and society.

However, the above 2 projects came into operation in the context of the petrochemical industry facing many difficulties due to the impact of the recession cycle, current product prices are not enough to cover production costs, so investors have proactively implemented plans to adjust production and business plans, restructure operations, and shift to importing input materials; at the same time, recommending competent authorities to remove difficulties and obstacles in mechanisms and policies.

Faced with investors' difficulties, provincial leaders have proactively worked and provided guidance; promptly synthesized, reported, and proposed to the Prime Minister for consideration and direction.

After listening to information provided by ministries and localities and having detailed reports related to current policies and laws as well as the reality at these two enterprises, Deputy Prime Minister Tran Hong Ha directed the relevant ministries to continue studying the proposals of enterprises to ensure proper implementation of regulations. Thereby, also considering studying the protection mechanism for domestic enterprises in this field. In addition, the Deputy Prime Minister noted that enterprises also need to quickly implement proposals for additional investment in the project for relevant agencies to receive, evaluate and propose.

Source: https://daidoanket.vn/pho-thu-tuong-chinh-phu-tran-hong-ha-hop-go-kho-cho-2-sieu-du-an-ty-do-tai-ba-ria-vung-tau-10294455.html