How will Preferential Tariffs Suspension Impact China BD Import Market?
Snapshot: On December 21, 2023, 12 items of chemical products from China’s Taiwan, including butadiene, etc., will stop enjoying preferential tax rates stipulated in the Economic Cooperation Framework Agreement (ECFA), the Customs Tariff Commission of the State Council has said in a statement. As one of the historical import trading partners of butadiene, China’s Taiwan only exported less than 2kt of butadiene to the Chinese mainland from January to November 2023, accounting for 0.5% of the total butadiene imports. China’s Taiwan is no longer the main butadiene import trading partner, and this tariff policy adjustment may have limited impacts on the overall cost of imports from China’s Taiwan.
Tariff policy adjustment details
Starting January 1, 2024, 12 items of chemical products from China’s Taiwan, including butadiene, etc., will stop enjoying preferential tax rates stipulated in the Economic Cooperation Framework Agreement (ECFA), the Customs Tariff Commission of the State Council has said in a statement.
List of Products with Tariff Reductions Suspended
The import volume of butadiene from China’s Taiwan leveled down notably.
China’s butadiene supply was not very loose before 2020, which was still replenished by some imports. From 2018 to 2019, the annual import volume of butadiene in China remained at around 300kt, accounting for less than 9% of the total supply. After 2021, with the successive commissioning of China’s refining and chemical integration projects, domestic supply became ample gradually. The competition between imported and domestic butadiene intensified. China’s butadiene import volume began to slide from about 300kt in 2018 to 170kt in 2022, a drop of more than 40%. According to GACC, from January to November 2023, the total import volume of butadiene reached around 380kt, among which the imports from China’s Taiwan were less than 2kt with the import proportion dipping to 0.5%. Compared with 34kt of imports from China’s Taiwan in 2018, the proportion crashed by 11% in 2023.
According to SCI, from 2018 to 2019, China’s Taiwan was still the top 5 import trading partners. In 2023, the top import trading partners of butadiene included South Korea, Malaysia, the Middle East and some European and American countries and regions. In 2023, with periodic arbitrage opportunities, deep-sea cargoes were replenished to China’s butadiene market greatly.
China’s Taiwan butadiene capacity proportion in Asia’s total
In recent years, there was no newly added butadiene capacity in China’s Taiwan, and its share only accounted for around 5% of Asia’s total, ranking fourth. According to SCI, China, South Korea and Japan ranked among the top three in Asian butadiene capacity. The butadiene capacity in the above three countries took up 78% of the total. According to GACC, China’s Taiwan has become the main butadiene export destination of China. Especially from 2021, the butadiene exports to China’s Taiwan surged from over 10kt to 30kt from January to November 2023. As some crackers in China’s Taiwan remained offline for a long period, the butadiene output was insufficient. Therefore, China’s Taiwan needed to import butadiene. In 2023, it is estimated that China’s butadiene output may reach around 4,400kt, continuing to hit record highs. Periodic sufficient domestic supply and arbitrage will render export opportunities for China.
To sum up, starting from January 1, 2024, after the suspension of enjoying preferential tax rates stipulated in ECFA of butadiene originating from China’s Taiwan, the import tariff will be adjusted from zero to 2%, slightly pushing up the import cost of butadiene from China’s Taiwan. Calculated on the weekly average CIF butadiene price of $965/mt monitored by SCI, it is projected that the import cost may rise by RMB 150/mt. Due to the notable drop in imports from China’s Taiwan, it is predicted that the tariff policy adjustment may have a limited impact on total imports and imports from China’s Taiwan.
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