SINGAPORE (ICIS)--Trades in Asia's petrochemical markets are largely cautious ahead of a major regional conference, as uncertainty over the intensifying trade war between the US and China continued to cloud business sentiment.A container ship is unloaded at the Virginia International Gateway terminal in the US. President Donald Trump's latest tariff hike on Chinese goods took effect 10 May and Beijing said it would retaliate, escalating a battle over China's technology ambitions and other trade tensions. (Steve Helber/AP/Shutterstock)
The trade war between the world’s two biggest economies has escalated as market players prepare for the 2019 Asia Petrochemical Industry Conference (APIC) in Taipei, Taiwan, on 16-17 May, with the theme: "Smart Petrochemical Processes - Sustainable Solutions Enabling a Better World".
Industry players were mostly mulling over the potential long-term impact of the latest round of tit-for-tat tariff hikes by the US and China.
In the adipic acid and melamine markets, players were concerned that the trade war-related depreciation of the Chinese yuan (CNY) would dampen sentiment and exert downward pressure on prices in the long run.
A weaker currency makes imports expensive, and China is a major importer of petrochemicals in Asia.
Downstream markets players in Asia-based olefins such as 2-ethyl hexanol (EH) and acrylic acid (AA) have adopted largely taken a wait-and-see attitude on the latest development.
“Regarding US-China conflict, it is very hard to predict the outcome. It will change dramatically whenever Trump tweets anything positive. Trump will not let the US stock market continue to crash,” said Asian SBR producer.
The butadiene (BD) market is not expected to be affected much by the escalation of the trade war, a producer said.
“For June, the supply is still tight and there is still demand for BD and there is no impact on market sentiment in the BD market,” a BD supplier said.
In the mixed xylene (MX) market, spot prices are falling due to the escalating trade war and the resulting weakness of the Chinese yuan, which dampens China’s import demand.
China’s Ministry of Finance announced plans to impose higher tariffs of 5-25% on 5,140 US products worth about $60bn from 1 June, in response to US’ tariff hike on 10 May that hit $200bn worth of Chinese goods.
The recent round of tariff hikes has rattled global markets, with the Dow Jones Industrial Average slumping by 2.38% and the Nasdaq composite shedding 3.41% overnight.
Asian equity markets followed suit on Tuesday, with Japan's benchmark Nikkei 225 down 0.42%, Hong Kong's Hang Seng falling by 1.56% and Singapore's Straits Times Index 0.98% lower by 12:00 hours Singapore time (04:00 GMT).
US President Donald Trump is threatening further duty hikes on the rest of US imports from China.
The US on 13 May released a list of new tariffs of up to 25% that it could impose on an additional $300bn worth of Chinese goods, but Trump has said that he has not decided on whether he will ultimately impose those levies.
"Should these goods see a tariff imposed on them, it means that almost all imports from China will be impacted by import duties," Singapore-based UOB Global Economics & Research said in a note.
"The consolation perhaps, is that the new tariffs will not take effect until late June at its earliest, amid a G20 meeting summit meeting on 28-29 June which would likely be closely watched for more cues on how the US-Sino trade talks progress then," it added.
Singapore's OCBC Treasury Research in a note said: "At this juncture, the stakes are being raised in the US-China trade war version 2.0, and Asian markets are likely to extend its risk-off tone this morning [Tuesday] while watching for the RMB (Chinese yuan) direction."
High-level negotiations between the US and China are expected to continue at the G20 summit in June.
Trump said the US is in a “great position,” in the negotiations, noting that “our economy has been very powerful; theirs has not been".
Additional reporting by Helen Yan, Joson Ng, Judith Wang and Keven Zhang
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