China Seen Importing US Ethanol via Alternative Routes Amid Trade War

by Srijan Kanoi (S&P Global Platts) China has switched to importing US ethanol via alternative routes since the US-China trade war erupted in April, the country's General Administration of Customs data indicated Tuesday.

In a surprise to the market, the data showed that China imported ethanol from Indonesia and Malaysia, both countries with little or no domestic ethanol production.

It was also the first time that both the countries had exported any ethanol to China, market sources said.

US origin denatured ethanol imports incur a 70% import duty in China and US undenatured ethanol incurs a 50% import duty. Exports out of Indonesia and Malaysia into China are duty free and subject only to the standard 16% domestic VAT, S&P Global Platts data showed.

Traders have been looking for alternative routes to sell ethanol to China since the 70% import duty on US ethanol imports firmly closed the arbitrage window between the two countries.

"The hike in import duty [for ethanol from the US to China] to 70% has killed the imports into China," a trader said.

The importing of US ethanol into China via other countries is likely to continue, with US Department of Agriculture data showing that the US exported 50,600 cu m of ethanol to Malaysia in September.

The import of US ethanol into Malaysia is not for domestic consumption but for re-export, a trader said. "What is really happening is a ship-to-ship transfer and a document switch, putting Malaysia as origin, and the product is being shipped into China," the trader claimed. READ MORE