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Insight | Time:Apr 8 2018 4:25PM
How trade war affects China nylon 66 chip market?
 
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Escalating trade tussles between the US and China
The US government announced on Apr 3 a proposed list of 1,300 products subject to a suggested tariff of 25 percent, which mainly would cover Chinese exports of mechanical and electrical products, worth $50 billion.

In response, China unveiled a list of 106 products on Apr 4 worth $50 billion imported from the US that will be subject to additional tariffs of up to 25 percent, including soybeans, passenger airplanes, cars and chemical products, and nylon 66 chip (HS code: 39081011).
*Import tariff of nylon 66 chip on the US is 6.5% currently effective.



The above chart shows a trend of China’s nylon 66 chip imports in recent 6 years. During 2013-2017, total nylon 66 chip import weighed over 250,000mt annually and the volume sourced from the U.S. was waving closely around 50,000mt. Word leading nylon 66 chip producers, Invista and Ascend’s main production bases are located in the land of USA, and they have kept steady supply to Chinese buyers for recent years.



In 2017, China domestic nylon 66 chip production totaled around 300,000mt, with import volume around 271,000mt, including 47,000mt from the US, and 10,200mt through “ordinary trade”. The 10.2kt chips are under actual influence of the additional tariff, and this volume is trivial compared with around 500kt apparent demand of China nylon 66 chip market. So the impact on overall nylon 66 chip market is limited.

However, as tariff surges 25% from 6.5%, part of domestic chip importers, who depend highly on the US sources, would suffer heavy impacts, especially when overseas chip supply is tight around the world and prices are expected to climb higher.

And for suppliers, Ascend takes around 36% in the 10.2kt chips, and it will be more impacted when Invista is supplying more through its Shanghai plant. Ascend will be the mostly influenced nylon 66 chip supplier this time.

Looking back onto current nylon 66 chip market, most players have expected prices to go lower before the tariff news. But afterward, market seems to be underpinned or even speculated up. The impacts on domestic chip market fundamentals are estimated to be small in a longer run.
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