US-China trade war brings advantages, challenges to Chinese re-export converters

Source: ICIS News

2019/05/22

GUANGZHOU, China (ICIS)--The ongoing US-China trade war has brought both advantages and challenges to Chinese re-export converters, participants said on the sidelines of this year’s Chinaplas.

Chinese re-export converters purchase imported resins and then export the finished product after processing the resins. Through government incentive programs, these converters are able to reclaim customs duties and other taxes incurred after exporting the finished product.

“We have been receiving offers for US polyethylene (PE) at very attractive levels in recent months, which has caused us to purchase more of our raw materials from the US rather than our normal Middle Eastern suppliers,” a Chinese re-export converter said.

Following the introduction of additional tariffs of 25% on US imports of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE), US sellers have found themselves cut off from most sections of the Chinese market and only able to successfully conclude deals in large volumes with re-export converters.

The US is in the middle of a significant boom in PE capacity and the loss of easy access to the Chinese market has raised questions as to where US sellers will be able to place their additional volumes.

While the trade war is giving re-export converters access to attractively-priced US cargoes, the trade war has also cut these converters off from the lucrative US market for finished plastic goods.

“When the additional tariffs on Chinese product were at 10%, we were able to cover this additional cost by paying 5% of the tariff ourselves while our customers paid the additional 5%.  With tariffs now up to 25%, this arrangement is no longer workable and we are looking for alternative destinations for our finished products,” a re-export converter stated.

PE is the most widely used plastic in the world, primarily found in packaging including plastic bags, plastic films and geomembranes.

Chinaplas runs from 21-24 May in Guangzhou, China.