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Chemical reaction to trade war

22 November 2019

US petrochemical exports to China falling YoY since June 2018

The commercial viability of some production capacity increases in the US chemical industry is being questioned, according to the American Chemistry Council (Reuters). Increasing barriers to trade with China and Europe may limit access to these foreign markets in future years. The US has nearly 5mil mt capacities coming online for ethylene glycol (MEG) from 2020, with another 6.8mil mt in announced projects for methanol, according to Eastport Research and Strategy calculations. Much of this increase in capacity exceeds domestic demand requirements and is targeting overseas markets. Indeed Chinese appetite for some chemicals, such as methanol, is likely to grow in coming years. But China has slapped 25% retaliatory tariffs on US methanol shipments, as well on major bulk chemical exports such as ethylene dichloride (EDC) and MEG. Such levies reduce the competitiveness of US chemicals on the Asian mainland. US petrochemical shipments to China have fallen 69% YoY in the first nine months of 2019. A prolonged trade war would also likely result in slower growth in China, reducing final demand for manufactured products and petchem feedstock import requirements as well.

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