Long Son Petrochemical Company (LSP), affiliated with Thailand's SCG Chemicals, is urging the Vietnamese government to impose taxes on imported polyethylene and polypropylene (PE and PP) as part of its strategy to protect domestic production amid challenging market conditions. This proposal coincides with the company’s struggle to resume operations at its $5.4 billion petrochemical complex located in Bà Rịa - Vũng Tàu, which has been idle since November 2024 due to low profit margins.
According to LSP's plans, this tax relief is intended to shield local producers from the adverse effects stemming from cheap imports. A company representative confirmed via email to Reuters on February 26, 2025, stating, "LSP is actively collaborating with relevant authorities in Vietnam to expedite the proposal for duties and non-tariff measures on PE and PP to protect local producers." This step signifies more than just financial relief; it aims to stabilize the local industry at large.
The Long Son plant was forced to cease operations shortly after its launch due to drastically falling profit margins, which the company cites as being unacceptable. The representative stated, "The petrochemical business situation is still languishing amid the volatile global economy," highlighting the broader struggles facing the industry.
To combat these issues, LSP is pivoting to use ethane as a raw material instead of the more commonly used naphtha and propane, reducing production costs significantly. This shift is projected to involve $500 million worth of investment, with plans to complete the transition by the end of 2027. LSP has secured agreements with Enterprise Products Partners, a U.S. gas supplier, for 15 years of ethane supply, which is expected to bolster the plant's competitiveness.
They are also engaged with Mitsui O.S.K. Lines for the long-term chartering of Very Large Ethane Carriers, with additional contracts for two more vessels under consideration. The anticipated outcome is to stabilize and reduce production costs through lower-priced ethane, which can drive competitive pricing for local products.
Despite having been sidelined, LSP's vision for the future includes enhancing production capabilities, with plans to manufacture large volumes of polyethylene and polypropylene due to regained stability in input sourcing. Once resumed, the facility is expected to produce around 1.4 million tons annually, including high-density polyethylene and linear low-density polyethylene, among others.
This situation is emblematic of the challenges not only faced by LSP but by the global petrochemical sector, as many companies encounter similar market pressures exacerbated by fluctuatory raw material costs. LSP's proactive stance on seeking tariffs and transitioning to alternative materials speaks to the nimbleness required to navigate this volatile market.
With Vietnam’s economy showing signs of volatility, it remains to be seen how government actions will align with industry needs to facilitate growth and resilience among local producers. If approved, the proposed tariffs may provide the necessary buffer to allow LSP and others to regain operational stability and return to full production efficiency.
Through these efforts, LSP looks to not only safeguard its position within the local market but also to play a significant role within the broader narrative of Vietnam's industrial evolution amid pressing economic uncertainties.