SINGAPORE (ICIS)--Petrochemical players in Asia do not expect the US-China phase 1 trade deal to translate into better market conditions in the near term, as tariffs on most products were not lifted.
While marking a turning point in the long drawn-out trade war between the world’s two biggest economies, the signing of the phase 1 deal after months of delays has largely been priced in while market uncertainties have not been completely dispelled.
Chinese goods worth $250bn will continue to be subject to US tariffs of 25%, and a reduced tariff rate of 7.5% will apply to another $125bn of US imports from China.
Under the deal, China has pledged to import at least $200bn worth of US goods in 2020-21. About 40% of the total will be manufactured goods, a category covering chemicals.
There is no word yet on any change in China’s tariffs on US goods.
The easing of trade war tensions, however, has somewhat lifted sentiment in some petrochemical markets in Asia.
“Demand for PS [polystyrene] brightened on news that US-China trade tensions would reduce and that a deal was imminent … since December,” a regional distributor said.
PS goes into appliances, which are among goods hit by US tariffs.
China's mixed xylene (MX) market saw an upward momentum as the yuan strengthened against the US dollar.
For polyethylene, since China’s tariffs on US cargoes remain in place, the country will continue to attract cargoes from Middle Eastern producers.
In the ethylene dichloride (EDC) market, China’s imports of US cargoes are not expected to rebound anytime soon. Its intake of US EDC had shrunk to 2,678 tonnes in 2019 from 225,930 tonnes in 2018.
In the ethylene dischloride, vinyl acetate monomer (VAM), mixed xylenes, styrene butadiene rubber (SBR), oxo-alcohols and plasticizers markets, the overall response is tepid as the positive news came at a period when regional trades are slowing down ahead of the Lunar New Year holiday.
The Lunar New Year, which falls on 25 January, is celebrated in most parts of northeast and southeast Asia. China will be on holiday for a full week from 24 January.
“The tyre makers in China will be away for the next two weeks for the Lunar New Year holiday and the US-China trade deal will have no significant impact,” a Chinese SBR producer said.
“The major Chinese tyre makers have already shifted their production facilities to southeast Asia, in Thailand and Vietnam, to grow their business in these countries,” the producer added.
And, for the rubber market, the prolonged slump in the automotive industry overshadows any other concerns.
“The trade war has been so long drawn, and the deal will not have any significant impact on the market as the auto industry has been in the doldrums for some time as it is in transition to electrification,” a rubber trader said.
Focus article by Pearl Bantillo
Additional reporting by Jonathan Chou, Veena Pathare, Min Jie Yaw, Helen Yan, Helen Lee, Keven Zhang, Joson Ng
Photo: US President Donald Trump and China
Vice Premier Liu He sign a US-China trade deal
in Washington DC on 15 January 2020.
(By Greg E Mathieson Sr/MAI/Shutterstock)
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