【SCI View】China to Hike Tariff on American Undenatured Ethanol

In the face of increasing tariffs imposed by the United States, China adopted reasonable countermeasures. On Aug 23, the official website of the Ministry of Finance of China issued an announcement that it would impose tariffs on USD 75 billion of goods from the U.S. Undenatured ethanol was once again listed. This is the fourth time since 2018 that China has imposed tariffs on imports of ethanol from the United States.

From December 15, 2019, China will impose 75% tariffs on undenatured ethanol and 70% tariffs on denatured ethanol from the U.S.

In fact, given that China’s ethanol prices have been at a low level and the demand for ethanol has declined in 2019, the import volume of ethanol fell rapidly. Therefore, the current import tariffs have made it difficult for overseas ethanol resources to hit the Chinese market. From January to July 2019, China imported only 49.2kt of undenatured ethanol. Last year, China imported 220kt. In the past two years, more than 90% of China's undenatured ethanol imports came from Pakistan. However, the arbitrage opportunity of undenatured ethanol between China and Pakistan is slim. Based on Pakistan REN-grade ethanol’s CFR price at 700 USD/ mt, \ the tax-inclusive price of undenatured ethanol is 5,750 RMB/mt. At present, the ethanol price in East China is basically at 5,250-5,400 RMB/mt including tax. For denatured ethanol, the current price of the ethanol exported from the U.S. to China is higher than 600 USD/mt. After 70% tax is paid, it is still higher than the current China’s fuel ethanol price of 3,000 RMB /mt.

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