Once again, US PVC producers have tasted the bitter flavor of the trading barriers in Brazil.

Ending weeks of growing anticipation that kept trading activity muted, Brazil's Chamber of Exterior Commerce (CAMEX) last week reinstated a 16% direct anti-dumping fee for US-origin PVC suspension material.

The official resolution hit US manufactures and Brazilian PVC consumers looking for cheaper product from the US like a bucket of cold water.

For buyers, it means having to forego the chance to buy US-origin product at around $950/mt FAS Houston, and instead having to pay almost $350/mt more to buy from local producer Braskem or from Colombia or Asia.

Prior to the recent resolution, the Brazilian government used to calculate, on a quarterly basis, reference prices for US and Mexican PVC, noting that the direct antidumping fee should not exceed 16% of the CIF price per ton on US imports traded and 18% in the case of Mexico.

"Imports from USA no longer have the quarterly adjustment of a reference price; it is now 'ad valorem' tariff," said Abelardo Mendes Jr., a spokesman with the Ministry of Development, Industry and Foreign Trade.

Based on data from the Ministry of Development, in 2010, the reference prices for US PVC averaged $1,560/mt. In 2011, for the period of March-April-May the reference price was calculated originally at $1,432,00/mt, however it was adjusted to $935/mt due to an unplanned outage at Braskem's chlor-alkali plant in Maceio, Alagoas.
The reduction on the reference price excluded US PVC producers from having to pay the 16% anti-dumping fee due to the supply tightness in the Brazilian market, giving an opportunity for US manufacturers to increase exponentially its exports to that market.
Data from the US International Trade Commission, shows that from April to May of this year US PVC exports to Brazil jumped more than 200%, while during the second quarter of 2011 the increase was of 300% compared to the same period of last year.
Though US producers knew the Brazilian government had opened the door to them only temporarily, in September Brazil was one of the few outlets where they and other international PVC producers could sell product as global PVC demand was softening and prices continued falling.

Historically, September and October are months of strong demand in the South American country, because they mark the end of winter and the beginning of construction season.

But the dream has vanished, and now the US PVC will be more expensive compared to the Asian resin, even when the freight cost to ship from US to Brazil is almost $30 lower than from China.

This is not the first time PVC producers trying to sell into Brazil have seen their efforts frustrated.

Earlier this year, the Brazilian government began to require import licenses for PVC. Given the lack of information and the added bureaucratic procedure, PVC producers around the world shifted their interest to other regions.

Then the Braskem outage happened, and the rest is history.

Last December, the Association of Plastic Laminated Industries requested CAMEX to eliminate the anti-dumping fees imposed on US - and Mexico-origin PVC imports - approved more than 15 years ago - arguing that domestic demand outpaced the supply capacity of Brazilian producers. The PVC buyers in Brazil also have to pay a 14% of tax duty when they import from US.

CAMEX responded by extending the punitive fee five more years.
The measure, coupled with recent unfavorable exchange rates between the Real and the US dollar, has effectively killed any buy interest in US-origin product from Brazilian importers, who must now look to Asia for product.