Chinese importers expecting cargoes of US commodities from beef to propane said they hope to sell the goods to South Korea or Japan after Beijing's decision to slap extra tariffs on a swathe of items from agricultural products to chemicals. Beijing on Wednesday hit back against the Trump administration's plans to impose tariffs on $50 billion in Chinese goods, retaliating with a list of similar duties on key US imports including soybeans, planes, cars, whiskey and chemicals. The speed of China's move stunned financial markets.
Traders of soybeans, of which China is the largest importer, said they were bracing for mass cancellations of purchases, even though the United States is the country's second-largest supplier. Prices of soybeans shipped from ports in the US Pacific Northwest, the most direct route to Asia, dropped by $10 to $12 per tonne on Wednesday, US soybean traders said. Buyers of propane used for making ethylene and propylene are looking to swap US shipments for Middle Eastern barrels with buyers in South Korea and Japan.
"Even though we are committed to US supplies, we could swap them for Middle East cargoes with Korean or Japanese buyers by paying them $10 per tonne extra freight cost," said a manager with an east China-based chemical plant that buys US propane, and who gave only his surname, Zhong. China bought 3.56 million tonnes of US propane last year worth some $2 billion, or 19 percent of its total imports.
The 25-percent additional tariffs will likely hit US-based exporters such as Enterprise Product Partners and Phillips 66, and give a boost to rivals in the Middle East like Qatar and Saudi Arabia. "The market will be thrown into some initial chaos and the freight market will also be affected. Diversions and swaps mean the demand for tankers will be lower, as US voyages are shorter to northeast Asia and also shorter from the Middle East to China," said a senior dealer with Jovo Energy.