US PVC dropped from the list of China's proposed retaliatory tariffs

Source: ICIS News

2018/08/10

HOUSTON (ICIS)--US polyvinyl chloride (PVC), under threat from retaliatory tariffs from China since 15 June, has been removed by a revision of Chinese targets.

Precursor ethylene dichloride (EDC) remains on the list, set to face tariffs of 25% on 23 August as proposed by China, the US’s largest EDC customer in 2017, according to US International Trade Commission (ITC) data.

Participants were still trying to figure out the changes to the China list of tariffs, and many had not yet received word of the revision.

“That is not what I’ve understood,” said a trader who works in several markets about the revisions.

China has been the US’s second-largest buyer of PVC, taking 300,000 tonnes of US material in 2017. This is about 11% of US exports and about 4.2% of total US PVC production.

US exports jumped in May as sales were pushed to get ahead of any tariff implementation, but then retreated in June, according to recent government data.

Market participants have said that trade flows will merely readjust, with other countries replacing the US imports now rebuffed by the tariffs in China. The US would then replace whatever sales the global markets had dropped to sell into China.

China has reduced tariffs from India and South Korea, apparently to encourage sales from these origins as it ended buying from the US. That was a discouraging sign to US market participants who took it as a symbol of China’s resolve.

But a revision of the list of goods targeted for retaliatory tariffs was revised by China Department of Commerce officials. The new list drops PVC, but adds important formulations of polyethylene (PE), a plastic resin that many US producers have just built new plants to make in order to sell into China.

The retaliatory tariffs were aimed at the second round of US tariffs aimed at the country, aimed at $16bn in goods from China to the US.

That was in addition to tariffs against $34bn in Chinese goods implemented on 6 July.

The revisions are a relief to US producers and other export players who were searching for ways to replace the lost business to China.

Several were working on selling into India, the world's largest PVC importer, where stiff duties have minimised US sales there in recent years.

US producers could drop prices by about $40/tonne FOB (free on board) US Gulf and still sell into India after paying duties of a bit more than $100/tonne.

Hopes are now that PVC will be kept out of the trade war that the US has launched against China and other trading partners.

But market participants and others said they would play it safe.

"It's hard to know from one day to the next what you can count on to make sales," a representative of a US producer said. "Business needs certainty in order to operate smoothly."

Major US PVC  producers include Occidental Chemical, Westlake Chemical, Shintech and Formosa Plastics.