The impact of tariff adjustment on Taiwan-originated PP

According to the China Customs, China imported 362,500 tons of polypropylene (PP) in Nov 2023, down 10.70% year-on-year. Of all imports, homo PP imports accounted 227.4kt, down 15.97% compared to the same period of last year; co PP 121.7kt, up 0.35% year-on-year; ra co PP for 13.5kt, down 4.43% year-on-year.

The total export volume of PP in Nov 2023 was about 122.3kt, a year-on-year increase of 95.15%.

The Tariff Commission of China's State Council has issued a notice on Dec 20, stating that it will suspend tariff concessions on certain products under the Cross-Strait Economic Cooperation Framework Agreement, in response to Taiwan's unilateral discriminatory measures, such as prohibitions and restrictions on the mainland Chinese exports.

Starting from January 1, 2024, the agreement tariff rates applicable to 12 imported products including propylene, Paraxylene, etc. originating from Taiwan will be suspended, and the current relevant regulations will be implemented.

According to this announcement, the primary impact on domestic polypropylene involve two aspects: propylene (29012200) and copolymer (39023010).

1. Propylene

From January to November 2023, the import volume of propylene was approximately 2.1949 million tons. Among them, the import volume from South Korea was approximately 1.2937 million tons, accounting for about 58.94% of the total. The import volume from Taiwan, China, was approximately 0.293 million tons, accounting for about 13.35% of the total.

In terms of the proportion of PP manufacturers, the proportion of imported propylene-based PP is only about 4.62%. Taking both factors into account, if the import tariff on propylene from Taiwan, China increases, it will have minimal impact on domestic PP production companies.

2. Copolymer

With the continuous release of domestic production capacity and the increasing self-sufficiency rate of PP, the import volume of general-purpose materials has been declining. However, there still exist technological barriers for copolymer products, and the overall import volume has not changed significantly.

In the imports of co PP (39023010), Taiwan, China has been in one of the top positions for a long time, accounting for around 20-30% of the total.

In the PP imports from Taiwan, China, the import volume of co PP exceeds 60%. Taiwan is one of the major import origins for copolymer products domestically. If the import tariffs are raised starting from January 1, 2024, it means that the import costs will also increase accordingly. In a situation of weak global demand, downstream factories are more sensitive to raw material prices, which may accelerate the substitution of imports from Taiwan, China.