Sino-U.S. Agreed not to Impose Additional Tariffs Further

Recently, China and the U.S. reached a consensus that both two countries would stop imposing additional tariffs on the imports of each other. SCI predicted that the reconciliation between China and the U.S. would exert a crucial influence on China’s ethanol industry in the long term. 

With escalating tensions between China and the U.S., China raised tariffs on the U.S.-origin denatured ethanol from 30% at the beginning of 2018 to 70%, in response to the U.S. move of imposing tariffs on imports from China. In Q1, 2018, China imported 340kt ethanol from the U.S., while as of October, almost no U.S.-origin ethanol shipment reached China directly.        

Currently, the arbitrage window from the U.S. to China remains closed, given that China places 70% tariffs on the U.S.-origin denatured ethanol. Theoretically, the price of the U.S.-origin ethanol is $515-530/mt CFR China, and the after-tax price is around RMB 7,128/mt. The current price in Shandong is RMB 5,700-5,800/mt generally. If the tariff rate falls back to 30%, the after-tax price will be about RMB 5,474/mt, thus the arbitrage window will open. 

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