Sino-US trade friction affects the glycerin market

On May 10, local time, the United States raised the tariff of 200 billion yuan of Chinese goods to the United States from 10% to 25%, and plans to impose tariffs on an additional $300 billion of Chinese goods. On May 13, the State Council Tariff Commission decided to increase the tariff rate on some imported goods originating in the United States from 0:00 on June 1, 2019. The crude glycerin with a tariff number of 15200000 and the glycerol (glycerol) of 29,054,500 are all included in the list of products with a 25% tariff.

For China’s glycerin market, the export volume is very small, and there are few exports to the United States. Therefore, the current round of US tariffs imposed on China has little impact on the Chinese glycerin export market. From the perspective of imports, refined glycerin raw crude glycerol, hydrolyzed glycerol raw palm oil are basically dependent on imports, and the dependence of refined glycerin imports is as high as 30%. The United States is also one of the countries of origin of China’s crude glycerin imports.

In 2018, China’s crude glycerin imports from the United States accounted for 9.06%. In the past five years, China’s crude glycerin imports from the United States accounted for less than 10%, and refined glycerin imports accounted for less than 1%. The reduction in the number of sources of supply from the United States is a high probability event. However, there is no need to expect supply shortages. Southeast Asia and South America benefit from the advantages of production, quality, and tariff policies, which can fully fill the gap in the reduction of US supply.

Recently, due to the fierce influence of Sino-US relations, the recent performance of the RMB exchange rate continued to decline. The central parity of the US dollar against the RMB rose from 6.7286 at the end of April to the current 6.8365. The import cost of crude and refined glycerin has risen by several tens of dollars. Since crude and refined glycerin are in a falling market and are currently at a lower price, the narrow fluctuation of the exchange rate has limited support for the increase in import costs, but it does not rule out that the renminbi continues to depreciate, and the space for import cost improvement is also likely to continue to expand. Therefore, domestic buyers and intermediaries have recently been cautious about the receipt of US dollars.

In addition to these short-term, relatively intuitive effects of import sources and import costs, the tight trade between China and the United States may lead to a reduction in demand in the domestic glycerin market.

Sino-US relations have little impact on the direct downstream products of glycerol. The impact is mainly concentrated on the demand for end products. The United States is one of the consumers of some terminal semi-finished products of glycerin. Sino-US relations are tense, and China’s export demand for glycerin derivatives may also continue to decrease. The downstream demand areas of the glycerin market are numerous and diverse, involving industries such as clothing, food, housing, and transportation. In recent years, a large number of small and medium-sized enterprises have been unable to start construction in domestic pollution control and safety inspections. Although large factories have certain competitive advantages, there are also problems of shrinking orders, and later in the expectation of reduced export demand. The pressure on terminal companies will continue to increase.

Although Sino-US relations have exerted certain pressure on the glycerin industry, we should not be overly negative. Enhancing product competitiveness, optimizing industrial structure, and enriching corporate operation models are still important tasks in the glycerin industry.

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