Brexit: What does the new trade deal mean for the UK polymer industry?
Last updated: 18/1/21.In a Hot Topic published in November 2020, we shared our concerns regarding the potential impacts of a no deal Brexit. Now that an agreement has been reached, we can assess how the UK polymer industry has been affected in the key areas which are likely to impact pricing and availability.
Tariffs – so what’s happening now?
The trade deal agreed means that thermoplastics raw materials sold by EU manufacturers can be imported into the UK tariff free. The UK schedule of Global Import Tariffs applies to imports from other regions.
How has a trade deal affected the value of sterling?
The trade deal meant that the feared devaluation of Sterling versus the Euro and the Dollar was avoided. However, the appreciation of Sterling was only very slight due to market expectations that a deal would be reached along with concerns about the impact of the new Coronavirus variant on the UK economy.
What influence will the new agreement will have on the movement of goods?
Whilst a trade deal has been reached, our exit from the European Union means that free movement of goods is no longer permissible. There are therefore increased paperwork requirements to import goods into the UK. It was feared that these checks would cause delays at customs, particularly should some importers be unprepared to meet the new requirements. So far, the UK government has adopted a relaxed approach at borders and delays on importing goods into the UK have been minimal.
Of greater concern has been the requirements for returning vehicles to Europe where more stringent border checks are expected. The situation has been further complicated by the new variant of Coronavirus which has led to the requirement that all hauliers wishing to enter France have a negative Covid test. These potential delays have meant that many hauliers are unwilling to accept UK commissions or will only do so at a higher price (see Logistics Costs below).
The biggest issue which has arisen as a result of the Brexit deal is regarding logistics to Northern Ireland. Some of the new regulations were announced very late in December allowing little time for companies to adapt to meet the new requirements. Lead times have extended significantly as a result.
Issues continue at many UK ports, particularly Felixstowe. Pre-Brexit stockpiling has been cited as one of the main causes of congestion which is causing delays in goods arriving and the handling of containers through the ports. A number of shipping lines have refused to dock at Felixstowe port meaning trans-shipment from Europe is necessary and causing substantial delays to lead times. More details can be found in our Hot Topic entitled ‘Brexit: The potential impact on polymer prices’.
Logistics costs – will they increase?
The increased legislative requirements have increased costs to hauliers and these costs have been passed on to polymer importers. Many hauliers have also increased rates to cover potential border delays. Fortunately, the costs of logistics form a relatively small part of the total costs of most thermoplastic raw materials although undoubtedly the increased costs will be passed on.
Supply & Demand – what will be the net effect on the supply chain?
Whilst we have no reports of material shortages specifically because of Brexit, the UK market for polymers of all types is currently very tight. This is due to a combination of factors, notably ongoing production issues at polymer plants in Europe and a lack of imports due to better netbacks elsewhere. Please see our latest Price Know How for more details.
Plastribution are here to help.
We can support your business by:
Securing specific stock for customers at a fixed price
Increasing our general stock levels over critical periods
Working with suppliers to ensure supply chains are robust and secure
Working with you to plan flexible and intelligent deliveries
If you’d like to discuss any of these options further, please contact Plastribution:
01530 560560 or [email protected]