Escalating Trade Disputes Influenced PE Market

On June 15th, the United States introduced a 25% tariff on $50 billion worth of Chinese goods imported into the United States. On June 16th, China decided to impose a tariff rate of 25% on the U.S. imports like farm products, auto and aquatic products, involving $34 billion worth of U.S. imports in 2017. Those measures will come into force from July 6 2018. Meanwhile, China planned to impose additional tariff of 25% on chemical products such as PE imported from the U.S. The final measures and effective date will be released separately. SCI predicts that the effective date of imposing tariff on U.S.-made LDPE will depend on the later actions of the U.S. SCI holds that at present, the direct influence of trade war on China’s PE market is limited. However, for American PE producers, the trade war will seriously influence their market share in China. Some PE source of goods will be difficult to enter into China.

In 2017, China imported 155kt of LDPE from the U.S., this number took up 6% of the total import volume of LDPE in China. Most of the imported PE were low-end ordinary film materials, and a few were special materials. Trade mode was basically general trade. If China finally impose 25% tariff on the U.S.’s LDPE, there will be no arbitrage space any more. At present, the LDPE inventory in China is high, and the market remains sluggish. The LDPE from the U.S. has weak price advantage. In the meantime, the high-end special materials can be purchased from South Korea, Europe and the Middle East. Overall, in terms of the impact of the trade war between China and the U.S. on their respective PE markets, the loss of the U.S. source of goods in the Chinese market will optimize the fundamentals of supply and demand, while American producers will completely loss the share of the market.

SCI suggests players should pay attention to the consequent impacts. SCI will continue to track progress.