If propylene and propane are not included in the tariff increase for the time being, can they rest easy?

The Tariff and Tax Commission of the State Council decided to raise tariff rates on some imports originating in the United States from 10:00 on June 1, 2019. The tax rate shall be implemented in accordance with the Notice of the State Council Tariff and Tax Commission on the imposition of tariffs on some imported goods (the second batch) originating in the United States (the Notice of the Tax Commission [2018] No. 6).

Propylene, propane and other products were not found in the list. After consulting the relevant information, it was found that on August 3, 2018, China imposed tariffs on 5207 imports originating in the United States, involving about 60 billion US dollars in import trade.

Tariffs imposed on propylene and other products are included in the list of tariffs imposed since 12:01 on August 23, 2018, involving about 16 billion US dollars in import trade.

Judging from the current situation, it does not rule out the possibility that China will continue to impose tariffs on American imports. The follow-up commodities are likely to be the first to impose tariffs in 2018, involving about $50 billion in import trade. Among them, propylene, propane and other products are among them. However, for propylene, the direct impact is relatively limited.

From the source of China’s propylene imports in 2018, propylene from Korea accounted for 51% of the total imports, while propylene from Japan and Taiwan accounted for 20% and 19% respectively. The remaining propylene mainly came from Southeast Asia. Propylene imports from the United States are only 29.6 tons, almost negligible. Therefore, even if China imposes tariffs on propylene from the United States, the direct impact is negligible.

However, some upstream and downstream products of propylene may be affected by tariffs, such as propane, polypropylene, acrylonitrile, propylene oxide, acrylic acid and so on. Especially propane, the total import volume is large, and the proportion of imports from the United States is larger, the impact is also expected to be greater.

In recent years, propane dehydrogenation to propylene has developed rapidly in China, and the raw material propyl alkyl is basically dependent on imports. Once the tariff is imposed on propane, the cost of propane dehydrogenation will increase dramatically. At present, the profit margin of propane dehydrogenation is extremely limited. Once the cost rises, the loss will become an inevitable result. Therefore, the impact of tariffs on propylene-related products needs close attention.