Trade War threatens propaganda exports from America to China

There were only a few days that China responded to the imposition of high customs duties in its response to American customs duties, until one of the corners of the oil market began to collapse with the interruption of bilateral trade between the two giant powers.

The price of propane, which is one of the types of liquefied oil gas in America, collapsed, after its sales to China – its second largest buyer after Japan – has become inexpensive, and Chinese buyers are currently rushing to find alternatives to this fuel, which is used in heating and plastic industry, but they are exposed to severe exploitation of merchants trying to benefit from the crisis.

Customs duties escalate

America and China were supposed to be a natural partner in the LNG market. America’s production jumped thanks to the shale oil boom, while China benefited from this by expanding its productive capacity to make the plastic.

Until last week these factories were nourishing the Chinese export machine, which relied heavily on American consumers, all this suddenly collapsed with the rapid escalation of customs duties.

Broban importers in China are currently trying to get rid of American shipments that are no longer able to bear their cost, in exchange for alternative supplies. But the offers they received for replacement operations amounted to $ 130 per ton, according to traders, or about 4 times the price they were ready to pay.

The largest affected of this crisis is the hydrogen extraction factories from propane, which transforms the raw material into propylene, and is one of the basic building blocks in the plastic industry. These factories operate with very small profit margins, as the huge expansion of production capacity coincides with the slowdown in the Chinese economy, which reduced operating rates and postponed new projects.

Trade between America and China

The LNG trade from Washington to Bakn has witnessed rapid growth in recent years, to reach one billion dollars per month, and America formed 60% of China’s imports of this fuel last year, or nearly 4 times the volume of imports from its second resource, which is the Emirate of Abu Dhabi.

Moreover, the shipments that come from the Middle East region often contain a mixture of propane and Biotan, which is less convenient as an initial material for China factories, a number of merchants reported.

Hydrogen removal factories from propane spread along the eastern coast of China rapidly, bringing the production capacity to about 22 million tons by the end of last year, equivalent to 3 times what it was 4 years ago, according to the company “Reesad Energy”.

According to the company’s research estimates, the customs duties imposed on imports 125% would have incurred these factories losses of $ 770 for each ton of American propane, which they processed last week.

But on the other hand, it could have made slight profits if it turned into the shipments coming from the Middle East, assuming the costs of transferring more modest of $ 30 per ton, according to analyst Manish Sigwal in “Reesad”.

Meanwhile, American exporters began obtaining new buyers from Europe, according to City Group. “Restad” added that India may also constitute a possible destination if the prices continue to decrease.