US-China trade war concerns hit Asian polymer market

The Asia-Pacific polymer market is turning bearish because of an escalation in the US-China trade war, which could lead to higher tariffs being imposed on many chemical products as soon as tomorrow.

The US Trade Representative (USTR) said yesterday it will increase tariffs on $200bn/yr of Chinese imports — including many polymers, aromatics and olefin products — to 25pc from 10pc, effective tomorrow. China may retaliate with similar tariffs.

The announcement came after a sudden deterioration in trade talks between the US and China this week, as US President Donald Trump accused Beijing of attempting to renegotiate a draft deal.

Geopolitics are weighing heavily on decisions of key buyers, trading firms and producers in southeast Asia and India.

Indian and southeast Asian buyers typically track the key China spot and Dalian futures market for price direction. Spot prices for polyethylene (PE) and polypropylene (PP) have largely weakened by around $20-30/t from the previous week.

The polypropylene (PP) market in southeast Asia is starting to turn after a couple of weeks on a bullish run. Offers for PP in southeast Asia were last heard around $1,180/t cfr, down by around $20/t from last week, with buying ideas at $1,150-1,160/t.

In India, buying appetite for PP and linear low density polyethylene (LLDPE) film is weak because of the market uncertainty.

Domestic producers in India had earlier announced price protection measures and reduced domestic polymer prices in an attempt to boost demand.

Indian buyers remain cautious and are not ordering large volumes of spot material for now until the price direction becomes clearer.

The poor fundamentals in India mean Middle East producers have not offered much supply to the country as they opt for markets with better netbacks.

Tomorrow's threatened increase in the tariff rate to 25pc was previously delayed from March, after Trump expressed satisfaction with the progress of US-China trade talks.

The US imposed the 10pc tariff in September last year. Chemicals covered by the tariffs include benzene, toluene, mixed xylenes, paraxylene, orthoxylene, ethylene, propylene, butadiene, isoprene, methanol, MTBE, chlorine, caustic soda, polypropylene, polyethylene and polyvinyl chloride.

China's finance ministry imposed retaliatory tariffs of 5-10pc on products including ethylene and polyethylene glycol, styrene-butadiene-rubber, ketones, styrene polymers, PET chips and plasticizers.