The impact of the trade war on the chemical indust

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The impact of the trade war on the chemical industry is disastrous

the impact of the trade war on the chemical industry is disastrous

September 29, 2018

US President donaldtrump's tariffs against China are gradually escalating, which looks more and more like a comprehensive trade war is coming

his decision "America first" - a signal that the United States will abandon the globalization concept that has dominated the global economy since World War II. Instead, it retreated to emphasize its own country and region, which has a significant impact on the chemical industry

with the rise of import tariffs among major economies, it is likely that the scope will be expanded and the intensity will be unprecedented. The chief executives of chemical companies will need to focus on ensuring that they have production bases in major markets. If a 25 per cent tariff is to be imposed on its exports, it may no longer make commercial sense to rely on a factory to serve the global market

from raw materials to market access

very close to cheap raw material inventory has been a key driver in determining the location of the plant over the years. At present, free market access may increasingly be a factor in decision-making

in fact, changes have taken place. For example, BASF decided this week to choose China to make the largest investment in its history and build a highly integrated base. The total investment of the project is expected to reach 10billion US dollars and will be settled in Guangdong Province. The company originally planned to locate its largest investment MTP unit (shale gas based propane) in the United States. BASF has shown a shift in its strategy by targeting China (without advantaged raw materials)

localized production in China has also become a priority for Tesla, an American electric vehicle manufacturer. This week, Tesla chose China rather than the United States to set up its world-class factory. China has a huge electric vehicle market. Now, Tesla has an equal position with local competitors in market access. The latest round of tariffs forced the company to increase the price of American made cars exported to China by $20000/vehicle

joint venture with China turns to sole proprietorship

China is seizing the opportunity brought by the trade war and formulating rules to allow such large-scale investment to be 100% wholly foreign-owned. BASF's new integrated base will be owned and managed by BASF; Tesla's new plant will also be operated independently. In the past, such projects required local joint venture partners. For example, Yangzi Petrochemical BASF Co., Ltd. was jointly established with Sinopec in Nanjing integrated base

people have different opinions on the impact of the trade war on us shale gas based emerging companies (some are 100% export-oriented companies). The tariffs to be imposed by China on the United States include low density polyethylene (LDPE) and linear low density polyethylene (LLDPE)

JamesRay, a senior ICIS consultant in Houston, pointed out that PE manufacturers purchasing American ethane have unique cost advantages. They can absorb the 25% tariff on products exported to China and still make profits. He said that the tariff will hinder the increase of more PE production capacity in the United States. Customers of our company Jinan new period assay instrument Co., Ltd. who buy experimental machines this month will give them a discount, but it is only a temporary situation. ICIS supply and demand database predicts that with the launch of new production capacity, the LDPE production capacity in the United States will increase from 35% in 2017 to 56% in 2020. For LLDPE, this figure will rise from 45.5% in 2017 to 65% in 2020

according to Ray's report, the exports of LDPE and LLDPE in the United States account for 12% and 17% of global exports respectively. "It seems that they can easily find another home for their production." In 2017, this product exported to China accounted for only 6.9% of LDPE Production in the United States, while LLDPE was only 0.4%

ray believes that Trump's current tariff policy is to correct the current trade imbalance between the United States and China. Since 1985, the United States has always had a trade deficit with China; Since 2012, this figure has increased annually to more than 300billion US dollars

icis consultant johnrichardson pointed out that China has proposed US $50billion tariff to the United States, including an additional 25% tariff on ethane exported from the United States. Eleven Chinese cracker projects rely on the export of American ethane, and the tariff crisis is keeping them alive. He believed that China could invest more in Iran to obtain alternative raw materials

global PE price war

paulhodges, chairman of internationalechem, a consulting firm, believes that tariffs may lead to a global PE price war because new production in the United States will affect new markets, most likely Europe

"this is not just a problem for the United States, because they still hope and will transfer their products to Europe, because there is no excess demand in Asia, the Middle East or Latin America." The consultant added that the first wave of these tariffs is to awaken those who believe that globalization will continue as in the past. "We have reached a critical point, and we expect the trade war to intensify," Hodges said


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