The trade tension in the US-China relation has become forefront since last year when President Trump announced first tariff to balance the trade gap. Both sides have taken many blows while maneuvering the strategies around to minimize the blow to domestic market. While this is not immediately expected to impact the Chinese manufacturing dominance globally, yet it can cause some deterrence to further expansion. Some of the signs to it are already visible and experts are expecting few more down the line.
The propane dehydrogenation (PDH) plant installations in the China have been considered as big thing in the olefins and base chemicals market which were invested based on assumption of steady flow of raw materials. The raw material of propane is in China is fulfilled to great extent via imports. Middle Eastern countries which used to account for major share have taken backstage in last few years, with the increasing imports from the US. The shale gas boom in the US was the key reason behind this cheap availability of propane for China.
In wake of the increasing trade tension and increasing tariff details, the Chinese propane imports from the US have reduced. This has added to the tension of PDH players who had already built reliance on the given import supply. On top of this, there are additional capacities coming in coming months, courtesy Chinese market targeted heavy investments in the recent past. Almost 9.5 million tons of combined capacity is expected by 2020, for which this increased cost of production significantly alters the return on investments. In case the solution is not reached by the two countries, the large investments are expected to slow down in Chinese market, especially which have the US based import reliability in their value chain.
– Ankur Kalra,
Manager – Chemicals & Materials,