Petrotahlil - Chinese petrochemical participants' response to Beijing exempting tariffs imposed on US imports has been muted with details on the application process and the qualifying volumes unclear.
Applications for the exemption of tariff will be accepted from 2 March onwards, according to China's finance ministry and will be valid for one year from the date of approval. But no details or guidelines were provided on the volumes of imports that will qualify under this exemption.
Should import volumes exceed the approved amount, these additional imports from the US will still be subject to the punitive minimum 25pc tariff slapped on US imports last year.
There is also uncertainty if exemptions will also be extended to trading firms and distributors, or if they will only be exclusive to consumers.
Petrochemical products affected by this round of easing trade tensions includes ethylene, high-density polyethylene (HDPE), linear low-density polyethylene (LLDPE), homopolymer polypropylene, paraxylene (PX), styrene monomer (SM) and ethylene glycol (MEG), all of which flowed into the Chinese market prior to the US-China trade war.
Chinese demand for PE could recover depending on the ease of applications and the volume of exemptions approved. US exports of HDPE and LLDPE to China reached a peak of more than 500,000 t/yr in 2018 but more than halved in 2019 as a result of the trade war.
Chinese demand for US-origin ethylene could also increase with Enterprise and Navigator Holdings' new 1mn t/yr export terminal at Morgan's Point, Texas now in operation. Nearly 130,000 t/yr of US ethylene found its way into the Chinese market in 2018 but this has fell by around 90pc last year as a result of the punitive tariffs.
If volumes subject to tariff exemptions are substantial, global polymers trade flows will be changed for the short term. US producers will opt to move LLDPE and HDPE supplies into China instead of southeast Asia because of shorter lead times and higher consumption. Middle East producers, which are currently exporting significant polymers volumes into China, will in turn move more shipments to southeast Asia and India.
Demand for PX in China could increase but this will have a limited impact on overall trade flows, as US-origin supplies will only account for a small fraction of China's 15mn-16mn t/yr of import demand.
Chinese demand for US SM is likely to remain depressed, as anti-dumping duties ranging from 13.7-55.7pc slapped on producers from June 2018 will remain in force even if the additional tariffs are removed.
The impact on MEG is also likely to be muted as most US-origin imports are meant for the re-export market, which is already exempt from the 25pc additional tariff.
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Source : Argus