Tariff Hike on U.S.-Origin Methanol Impacts China Market Little
On the evening of May 13, 2019, the Customs Tariff Commission of the State Council issued the Announcement on Raising the Tariffs on Some Goods Originating in the U.S., officially putting forward China’s countermeasures. According to the Announcement, China will impose 25% additional tariffs on the goods under 2,493 tariff lines; 20% additional tariffs on the goods under 1,078 tariff lines; 10% additional tariffs on the goods under 974 tariff lines; 5% additional tariffs on the goods under 595 tariff lines. These measures will take effect from 0 am on June 1, 2019.
Methanol is on the list of the goods to be imposed of 25% additional tariffs. Will the tariff hike impact China’s methanol import market? According to China Customs, China imported about 410kt of methanol from the U.S. since 2010, just taking up 0.78% of the total import volume.
According to SCI, China’s methanol output was 55,756.6kt in 2018, and the import volume was 7,432kt. The total demand volume was about 6,194kt during the same period, so the import dependence degree was just 12%. As for the import origins, China mainly imports methanol from the Asian areas where 74.8% of the methanol capacity is concentrated. Although the U.S. has seen fast growth in methanol capacity in recent years, it lacks advantages in the methanol export to China due to the long transportation distance and higher cost compared with Iran, Oman, etc. In addition, affected by the U.S. sanction on Iran, the methanol resources from Iran to China are expected to increase in the next 2 or 3 years, which will offset the import decline from the U.S. to some extent.
On the whole, China’s methanol capacity is still on an uptrend, and the demand growth is mainly concentrated in the MTO/CTO filed, but most of these newly added downstream units are matched with methanol units. Thus, China’s methanol market will be under tight supply-demand balance in the next several years, and the import dependence degree will not rise sharply. Therefore, the effect from this round of tariff hikes on the methanol originating in the U.S. is negligible.
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