SINGAPORE (ICIS)--Asia's petrochemical shares and prices of key feedstocks is set to be weighed in the near term by the latest tit-for-tat escalation in the trade war between the US and China.A currency dealer works in front of a display screen at the trading room of KEB Hana Bank's headquarters in Seoul, South Korea (YONHAP/EPA-EFE/Shutterstock)
Fresh worries over the trade war resulted in China's yuan (CNY) falling to a record low on Monday at CNY7.14 to the dollar.
In the energy market, Brent crude was down by 0.49 cents at $58.85/bbl after earlier having touched $58.24/bbl, the lowest since 15 August. US crude was trading 56 cents lower at $53.61.
Asia's naphtha markets tracked the losses on Monday with open-specification naphtha prices for first-half October delivery standing at $454.50/tonne CFR (cost and freight) Japan basis, down by $15.25/tonne from the previous Asia close on 23 August.
Bearish market sentiment weighed on Asia's benzene market, with prices falling by $5.00/tonne to $666.00/tonne in early Monday trade.
At 07:00 GMT, Japan's Mitsui Chemicals fell by 3.38% while JXTG Holdings were down by 1.66%. The benchmark Nikkei 225 index was 2.24% lower.
South Korea's LG Chem fell by 1.06% while Lotte Chemical was down by 4.18%. The key Korea Stock Exchange KOSPI index was 1.51% lower.
In Hong Kong, Sinopec Shanghai Petrochemical fell by 4.31% while PetroChina was was 3.31% lower. The benchmark Hang Seng Index was down by 2.95%.
Malaysian producer PETRONAS Chemicals Group fell by 2.49% while Thailand's PTT Global Chemical was down by 2.49%.
China announced late on 23 August duty hikes on $75bn worth of US goods starting September, to which US President Donald Trump responded with a threat to further increase tariffs on imports from China from 1 October.
The Chinese State Council on 23 August said it will impose new tariffs ranging from 5% to 10% in two batches effective on 1 September and 15 December, which includes US plastics and chemicals.
This includes an extra 5% tariff on soybeans beginning 1 September and an extra 10% tariff on US wheat, corn and sorghum from 15 December.
China will also resume 25% tariffs on US vehicle and 5% on US vehicle parts from 15 December.
The 1 September and 15 December dates dates coincided with when Trump’s latest tariffs on $300bnof Chinese goods are set to take effect.
In response to China’s latest trade action, Trump tweeted to order American companies to “immediately start looking for an alternative to China” including bringing the companies and production back to the US.
Trump also tweeted of a hike in tariff rates on most Chinese imports.
Existing tariffs on $250bn of Chinese imports will be raised from 25% to 30% on 1 October while tariffs on remaining $300bn of goods which is taking effect from 1 September will be at 15% instead of 10%.
"The reaction from China was consistent with earlier rounds of tariffs and was widely expected. However it was not expected this soon," Japan's Nomura Global Markets Research said in a note.
"A sharper-than-expected breakdown of US-China trade negotiations, or the pursuit of more aggressive trade actions by the Trump administration against other trade partners, could be a greater drag on [US economic] growth," it added.
Trade tensions between the US and China look poised to persist in the coming months, with no deals expected to be made until after the US presidential elections next year, according to Fitch Ratings.
The ratings firm said that Vietnam stands out as the "most immediate beneficiary of multinational firms' efforts to diversify and maintain access to US markets", especially for the textiles industry.
Continued tensions between the US and China will likely spur investment in Vietnam as manufacturers will prefer to ramp up production in locations that already have operations, Fitch said.
Vietnam is the second largest exporter of apparel to the US, behind China, making it an obvious diversification option, it added.
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Focus article by Nurluqman Suratman