PC Imports from the U.S. Decreased

U.S. President Donald Trump has signed the president’s memorandum. According to the results of the “301 investigation,” large-scale tariffs will be imposed on imports from China and Chinese companies’ investment for mergers and acquisitions in the U.S. will be limited.

China’s Ministry of Commerce intends to levy tariffs on part of the products imported from U.S., tentatively including 7 categories and 128 products. Part 1 involves 120 products, including fresh fruit, dried fruit, nut products, wines, modified ethanol, ginseng, seamless steel pipe, etc., and a 15% tariff is to be imposed. Part 2 covers a total of eight products, including pork and its related products, recycled aluminum, etc., and a 25% tariff is proposed.

Under the influence of the news, the commodity market appeared sluggish, with multiple products falling by more than 4%-7%. Market participants held strong wait-and-see attitude.

In terms of the PC market, although production technology originates in Europe and the U.S., capacity gradually spreads to Asia due to the growth of global demand. China’s PC capacity grew rapidly from 2013 to 2017, with an average annual growth rate of 16.5%. Affected by this, the import volume also went down after the historical peak in 2014.

South Korea, Taiwan Province and Thailand are the main origins for China in the recent years. Resources from the U.S. have maintained at the level of 100-150 kt, accounting for 7%-11% of the total import volume. The import volume was the lowest in 2017, and the import volume from the U.S. was 103kt, accounting for 7%. The average import price was $3,211.7/mt.

The resources from the U.S. are mainly imported through the Customs in South China. The import volume in South China accounted for 73% of total volume, with Guangzhou taking the lion’s share of 69%.

In term of the trade mode, 83% of the resources imported from the U.S. are conducted by the mode of processing trade with imported materials, and the general trade only accounted for 5%.

The production bases of Sabic and Covestro gather in South China, and the production of modified PC, alloy and sheet material are also centralized there. In 2017, the import volume in South China reached 717kt, up 9.8% Y-O-Y.

Covestro's production base in Shanghai has been planned for further expansion. The expanded capacity will reach 600kt. SABIC’s projects in Tianjin will also advance gradually, and the capacity is expected to be 260kt. In 2018-2019, China’s PC capacity will surge once again. While the domestic market is concerned about the intense competition of low-end goods, the transfer of the old brands’ production focus will ease the import demand of high-end sources to some extent.