How Feedstock Tariff Increase Affects ABS Market?

In accordance with No. 55 [2018] of the Ministry of Commerce and Notice of the Customs Tariff Commission of the State Council on Imposing Tariff on $16 billion Imported Goods Originating in the U.S., on Aug 8, 2018, the Customs Tariff Commission of the State Council has decided to impose additional tariff of 25% on adjusted goods originating in the U.S. which come into force on Aug 23, 2018.

As the feedstock of ABS, styrene (HS code: 29025000), acrylonitrile (HS code: 29261000) and butadiene (1, 3 butadiene HS code: 29012410) are all in the tariff list II. How will the ABS market be affected?

According to Customs’ data, China imported 3,212kt of styrene in 2017. Hereinto, 305.7kt was imported from the U.S., taking up 9% of the total. However, China has reduced imports of styrene from the U.S. since Jun 2017 when styrene anti-dumping investigation began. On Jun 23, 2018, Tariff Commission of the State Council decided to impose 13.7%-55.7% of anti-dumping duties on imported styrene from the U.S. for 5 years. On the premise of anti-dumping, another 25% tariff will have a limited impact on the styrene market.

China imported 270.8kt of acrylonitrile in 2017. Hereinto, 60.2kt was imported from the U.S., taking up 22% of the total. On Apr 4, 2018, China has announced a 25% tariff on 106 items in 14 categories, including acrylonitrile. The acrylonitrile market, which has been on the rise since Sinopec Anqing Petrochemical maintained the units, has seen a more rapid rise since the list was published. Some buyers have begun to seek alternative regional supplies. Thus the announcement this time will give impact on the acrylonitrile market.

China imported 360.7kt of butadiene in 2017. Hereinto, 22.4kt was imported from the U.S., taking up 6.21% of the total. With the lighting of feedstock brought out by the popularization of shale gas in the U.S., the proportion of ethylene from naphtha has been reduced, and the output of butadiene has been greatly reduced. It is predicted that the import volume of butadiene from the U.S. will gradually decrease in the next few years. Trade spat between China and U.S. have limited impact on butadiene market.

At present, the profits at feedstock producers were high. Styrene, acrylonitrile and butadiene prices show uptrend, and running at yearly peak. ABS prices are supported by the cost side. However, ABS market is in the slack season now. Many large home appliance producers lowered the operating rate or stopped production. ABS price growth drags down by the weak demand, and the ABS profits keep shrinking. Thus, imposing tariff on feedstock imported from the U.S. will have slight impact on the ABS market. In the game of cost, supply and demand, ABS market will continue the stalemate trend.