Asia BD market shrugs off China’s 25% tariff on US imports

SINGAPORE (ICIS)–Asia’s butadiene (BD) market is not expected to take a significant hit even as the key China market will start imposing an additional 25% tariff on US material from 23 August.

– US not a major exporter to Asia; China imports of US BD account for 6% of total in 2017

– China added about 400,000 tonnes/year of BD capacity since late-2017

The US is traditionally not a key BD exporter to Asia, and only tends to ship out BD to the region toward the end of each year as US producers destock, market sources said.

“BD spot prices will likely hover around $1,750/tonne CFR [cost & freight] NE [norhtheast] Asia for regional cargoes and lower for deep-sea cargoes this week,” a trader said.

Asia’s BD spot prices were stable at $1,730-1,770/tonne CFR NE Asia on 10 August, unchanged from the previous week, ICIS data showed.

China’s BD imports from the US in 2017 stood at 22,405 tonnes, accounting for 6% of the total for the year, according to data from Switzerland-based International Trade Centre (ITC).

“The US only exports BD towards the end of the year to clear their inventories before the end of the fiscal year, so this Chinese tariff on US BD imports will not have much impact on the Asian market,” an Asian BD consumer said.

China announced on 8 August that it will start imposing 25% tariffs on additional $16bn US goods, including BD, from 23 August, in response to a similar move by the US.

“We won’t consider imports from the US after the punitive tariff takes effect, unless the prices are very competitive,” a major Chinese BD importer said.

“We have other options and we can import from other countries,” the importer said.

Domestic BD capacity in China, which is a major BD importer in Asia, has also been growing.

From late last year, the country welcomed about 400,000 tonnes of new capacity, the latest of which is CNOOC and Shell Petrochemicals Co’s (CSPC) 180,000 tonne/year new BD unit that came on stream in April 2018.

“The arbitrage window from [the] US to China has been open just a few times, maybe once every two to three years, so there is no major impact [from the new tariffs],” a northeast Asian BD producer said.

“China is going to be a net exporter in a few years’ time,” he said.

Three other Chinese BD producers, including Jiangsu Sailboat Petrochemical, Bluestar New Chemical Materials and Shenhua Ningxia Coal Industry added new capacities late last year.

“Chinese domestic BD prices are cheaper this year compared with import prices due to the additional local BD supplies that came on stream since late last year, so Chinese BD spot appetite will be limited this year,” a trader said.

On 10 August, domestic BD prices were at Chinese yuan (CNY) 13,200-13,500/tonne ($1,919-1,962/tonne) DEL (delivered) east China, down CNY200/tonne at the high end of the previous week’s price range, ICIS data showed.

Focus article by Helen Yan and Judith Wang

($1 = CNY6.88)

Picture: Qingdao port in China. (Source: REX/Shuttertock)

Click here to view related stories and content on the US-China trade war landing page