NE Asia may see shift in ACN trade flow as US-China trade war simmers

05:02' PM - Friday, 13/04/2018

Northeast Asia may see a reshuffle in the trade flow of acrylonitrile should China go ahead with slapping an additional tariff on ACN imports from the US.

But so far, the brewing US-China trade war has drawn muted reaction from Northeast Asia ACN producers and the downstream Chinese acrylonitrile-butadiene-styrene market, industry sources said this week.

"If [the] tariff passes, then [US producers] such as Ineos currently selling to Chinese ABS producers will probably shift to South Korea or Taiwan instead. South Korean and Taiwanese ACN producers will move their cargoes to China accordingly, with a logistical markup," a trader said Tuesday.

Two China-based ABS plants most likely to be affected by the proposed tariff is the 700,000 mt/year Ningbo-LG Yongxing Chemical and the 850,000 mt/year Zhenjiang Chimei Chemical, as they take in significant ACN volumes from the US, industry sources said.

But with ACN imports from the US comprising just a relatively small fraction of China's overall imports, Northeast Asian producers do not expect any significant export opportunities for non-US producers, a Japanese ACN producer said.

China's Ministry of Commerce announced on April 4 that it will impose an additional 25% tariff on ACN imports from the US, but did not provide an implementation date. Other polymers in the list of products earmarked for the additional tariff include low density polyethylene and polyvinyl chloride.

Currently, China has an import tax of 6.5% for all polymer imports.

Chinese domestic ACN prices have surged Yuan 800/mt over the past two weeks to Yuan 14,800/mt Tuesday, according to S&P Global Platts data. The CFR Far East Asia assessment rose $35/mt to $1,985/mt over the same period, Platts data showed.

The proposed additional tariff follows a recent move by the US to impose stiff import taxes on steel, aluminum and other goods from China.

In 2017, China imported 270,778 mt of ACN, with the US accounting for 22% or 60,234 mt of the total, Chinese customs data showed.

MUTED RESPONSE FROM ABS, BUT TRADE WAR FEARS REMAIN

Following the commerce ministry's announcement, there has been no major reaction from the downstream ABS market, with the CFR China ABS marker assessed $10/mt higher week on week at $1,980/mt Wednesday, Platts data showed.

"The impact of any US-China trade war on ACN will likely be limited as China only imports a small quantity of US-origin ACN directly, with most ACN sourced from Northeast Asian countries," an ABS producer said Wednesday.

"The pickup in ABS demand recently has more to do with a ramp-up in downstream operating rates coinciding with warmer season as well as the release of new infrastructure investments for the new financial year," a Shanghai-based trader said Wednesday.

"However, it is concerning in the long run how much of an impact deteriorating US-China trade relations will have on the export of Chinese electronics, automobiles and household appliances into the US, all of which are major takers of ABS," he added.

Asian ABS prices have been on an uptrend since end-March, but most market participants were of the view that the rise was due to post-holiday re-stocking demand from end-users coinciding with a drawdown in inventories, rather than driven by feedstock costs.

Another large contributing factor to the strong performance in the ABS market in recent months is the increase in automobile sales in Asia, led by robust demand from China -- the world's largest automobile market.

China currently accounts for around half of global demand for ABS, according to market participants.

China's automobile demand this year is expected to rise between 3% and 4% from 2017, according to industry estimates. Demand growth rate is projected to be lower than previous years, due to a slowdown in economic growth this year, as well as a tightening of restrictions on car ownership to curb smog and congestion in major Chinese cities. - Platts -

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