Extra 25% Tariffs on U.S.-Origin Propane and Butane

The Customs Tariff Commission of the State Council on August 3 unveiled lists of 5,207 items of U.S. products to be subject to additional tariffs of four different rates – 25%, 20%, 10%, and 5% from August 23, 2018. Liquefied propane, liquefied butane and other olefins are on the list of products to be levied of extra 25% tariffs.

In 2017, China imported 3,540kt of propane and butane from the U.S., occupying 19% of the total. Influenced by the Sino-U.S. trade war, most market participants adopted an anxious attitude to the import market. Taking the cost of $600/mt for example, the import cost will increase by $120/mt after the extra 25% tariffs are levied. Most market participants are worried about the companies who sign long-term propane supply contracts with the U.S. companies. Recently, Oriental Energy showed that the total international trade volume at the company in July was 25 cargos, of which 10 were imported goods and 15 were re-exports. In July, Oriental Energy imported 6 cargos of propane and butane from the U.S. According to sources, Oriental Energy has started to adjust its imported resources since June, and the imported resources at the company in August has been optimized to be non-U.S.

According to sources, China’s importers will pay close attention to the Middle East market due to the extra 25% tariffs on U.S.-origin propane and butane. As for some companies who sign long-term propane supply contracts with the U.S. companies, they will control the import cost by exchanging resources with companies from other countries.

As for the future market, China’s overall demand for propane and butane in the Middle East will increase to some extent. Furthermore, the seasonal demand for propane and butane will be strong in Q3 and Q4, 2018. Therefore, SCI reckons that the international refrigerated LPG prices will go up in the long term.