EU likely to lower brown rice import tariff in March amid container shortages: sources

The EU is increasingly expected to lower import tariffs on brown rice in March, according to European market sources.

Under the current framework, the Commission reviews brown rice imports biannually – in March and September – and sets the import tariff at either Eur30/mt, Eur42.50/mt or Eur65/mt, depending on the rate of imports.

If biannual brown rice imports are lower than 191,113 mt, the tariff will be set at the lowest rate. If imports exceed 258,565 mt, it will be set at the highest rate, and if imports are between these thresholds, it will be set at Eur42.50/mt. The current import tariff of Eur65/mt has been in place since March 2019.

Brown rice imports (excluding Basmati rice) between Sept. 1-Feb. 9 totaled 136,448 mt, according to EU Commission data. This is well below the 191,113 mt threshold, with only 19 days until the review on March 1. Based on the average pace of imports so far in the 2020-21 marketing year (September-August), brown rice imports will only total 152,551 mt by Feb. 28.

Brown rice comprised 41% of EU rice imports (excluding broken rice) during 2020-21 up until Feb. 7.

However, the matter has been complicated by Brexit, which was finalized at the end of 2020. The UK was consistently the EU’s largest rice importer, accounting for approximately 23% of Customs Union imports in the first four months of 2020-21.

According to a Commission spokesperson, the EU will include UK brown rice imports up until Dec. 31 and only include EU27 imports in January-February when considering the brown rice tariff calculation. However, they did not say whether the tariff thresholds would be amended due to the UK leaving the Customs Union on Dec. 31.

While some sources speculated that the Commission may reduce these thresholds by using a historical average of UK brown rice imports, a spokesperson from the Federation of European Rice Millers (FERM) confirmed that this would not be the case and that they will remain unchanged for this review.

“We will be heading for a change and most probably… Eur30/mt,” the FERM spokesperson added. This view has been echoed by several European participants, who expect the tariff will be lowered to at least Eur42.50/mt.

The Commission is typically hesitant to predict whether the import tariff will be lowered, with one broker lamenting that “they will not reveal all of the info, as usual.” However, the Commission has an incentive not to guess the outcome of this review, given the erratic nature of the rice market in the past year.

While EU imports at the start of 2020-21 in September broadly kept pace with those of 2019-20, according to Commission data, the pace slowed by December as the impact of the global container shortage started to be fully felt in importing nations.

Total 2020-21 brown rice imports (including Basmati) up until Feb. 7 were down by 13% year on year. Similar reductions of 22% and 4.3% were recorded for broken rice and milled and semi-milled rice, respectively. The divergence from last year’s totals has been increasingly felt as 2020-21 has progressed, with importers struggling to source containers to ship cargo from Asia.

European participants have consistently reported that container freight costs from Asian origins such as Myanmar and Thailand have quadrupled in the last six months from typically under $1,000/TEU to around $4,000/TEU as shipping lines withdrew ships from their roster late last year.

In turn, major EU buyers have increasingly considered breakbulk shipments to make up the deficit. A bulk shipment trade of 12,000 mt of Argentine 5% broken brown rice has already been reported in recent weeks, while a buyer also recently stated that they were looking to source Myanmar rice for Europe in a 10,000 mt breakbulk shipment.

It is possible that a flurry of last-minute bulk shipments arriving at EU ports could tip the scales for a higher brown rice import tariff. However, all other signs point to the EU’s brown rice import tariff being reduced sharply from Mar. 1.
Source: Platts