Key petchem end markets most affected by US-China tariffs - UBS

09 April 2018 13:45 Source:ICIS News

LONDON (ICIS)--Chemical end markets like agriculture, automobile and aircrafts are most likely to be impacted by the growing tensions between the US and China over trade tariffs, Swiss investment bank UBS said on Monday.

On 4 April, China's Ministry of Commerce announced a 25% increase in tariffs on 106 products originating from the US.

One of the products impacted is E-series glycol ethers, for which US anti-dumping duty (ADD) rates will increase to 37.5%-75.5% from 12 April, up from 10.6%-14.1% currently in place since January 2013.

A Dow Chemical source said to ICIS on 6 April that in order to avoid the highest rate (75.5%) imposed on the company's US glycol ether exports, it was planning to change its global trade flows, ending US glycol ethers exports to China.

“[Dow will] cut immediately all supplies from north America to China," the source said.

"This is going to disrupt current trade flows, especially for Dow as we got a very high tax rate and we're one of the main exporters in the US. We plan to supply even more from Saudi Arabia to China," it added.

Dow is a partner at joint venture Sadara Chemical in Saudi Arabia with the country's crude oil major Aramco. The facility has the capacity to produce 200,000 tonnes/year of glycol ethers.

Other chemical majors are also likely to be rethinking their global trade strategies, with petrochemical markets impacted in the process.

The list of end markets compiled by UBS affects chemical imports to China are estimated to be worth nearly $2.2bn, including propane, acrylonitrile (ACN) and lubricants, according to UBS.

Whereas the total value of products impacted are valued over $48bn, accounting for over 30% of total US exports to China.

Consequences for end markets could prove significant, with key products affected including soybeans ($14bn), automobile ($13bn), aircrafts ($10bn), plastics and chemicals ($6bn), liquid gas ($2bn), cotton ($1bn) and other agricultural products such as corn, beef and tobacco.

China accounts for over 60% of the US’ total soybean exports, 10% of total auto-motives and 10% of total aircraft exports.

Companies most likely to be impacted in the automobile industry include BASF, Umicore, Johnson Matthey and Ems-Chemie.

Meanwhile, K+S, Yara and ICL are estimated to be most impacted in agriculture, according to UBS.

Pictured above: Dow and Aramco's joint venture Sadara Chemical in Saudi Arabia. The US producer has said it will increase exports to China from the facility
Source: Sadara Chemical

Focus article by Eashani Chavda

By Eashani Chavda