Petrochemicals and textiles encounter new barrier for sales to EU

This article was published by the Taiwan Headlines on March 17, 2006. It reports that new inspection criteria for textile and plastic products implemented by the European Union (EU) in 2005 will create a major impact on the textile and plastic makers in Taiwan and China. Other industries likely to be affected include upstream plastic, man-made fiber materials and speciality chemical factories.

The new inspection criteria implemented by the European Union target at over 30,000 chemical products. Those textiles and plastic products with chemical contents that fail to pass the inspection will not be able to enter the EU market for sales.

The new criteria are based on a legislation dubbed REARCH (Registration, Evaluation and Authorization of Chemicals), which will replace the existing 40-plus related directives and legal regulations. Inspection charge for the new criteria will hit 570,000 euros (about NT$22.2 million) per item, almost seven times the existing inspection fee of 85,000 euros (NT$3.3 million) per item.

According to representatives from the Petrochemical Industry Association of Taiwan, the exorbitant inspection fee and strict implementation of the new criteria will lead to a surge in the prices of imported precision chemicals, such as dyeing materials, from Germany and other EU nations. This will in turn have a major impact on plastic and textile makers in Taiwan. It is hard to estimate how many products destined for the EU market will be returned for failing to pass the inspection.

Industry analysts suggest that related Chinese industries will suffer the severest blow, since they account for the bulk of the imported textile and plastic products in the EU market. Because China is the major overseas outlet of various petrochemical makers in Taiwan, including the Formosa Plastic Group, USI Group, Far Eastern Group and Chang Chun Group, these Taiwanese petrochemical makers will also be affected.

Currently, the annual output value of the Taiwanese petrochemical industry is about NT$3 trillion. Major products include plastic materials, man-made fiber materials, and man-made fiber. More than 70 percent of Taiwan's output is shipped to China for the production of computer cases, home-appliance cases and garment, which are then shipped to the U.S. and EU markets.