Chinese ethanol and DDGs imports slump, even before tariffs bite


Chinese imports of ethanol and dried distiller's grains plummeted in December, and incentives to import are only going to weaken as import tariffs bite further.

Customs data showed Chinese ethanol imports in December down 31% year-on-year, to 124,823 cubic metres, as domestic production increased in response to falling corn prices.

Imports over the full year were up 29.6%, at 890,140 cubic metres.

Imports of dried distiller's grains (DDGs), a high-protein residue from ethanol production used in animal feed, fell 83.3% year-on-year, thanks to competition from more affordable domestic corn, as well as domestically produced DDGs.

Full-year DDGS imports were down 55.0% on the year, at 3.07m tonnes.

Higher industrial use

Chinese ethanol production is booming.

Last week the International Grain Council noted that "in China, the attractiveness of processing for ethanol and starch has been improved by official subsidies and there are reports that these could be extended".

Chinese industrial use of grain, which includes ethanol, was seen up 3.7% in 2016-17, at 66.5m tonnes.

Tariffs to bite further

And Chinese ethanol import demand is likely to drop even further, if it turns out that import duties will rise this year.

The Chinese government did not list ethanol among the agricultural commodities to qualify for a 5% tariff in 2017.

This means that barring further clarification from the government, it appears that ethanol import tariffs will rise back up to the normal 30% rate.

It is reported that a number of ethanol cargoes to China have already been cancelled in response to this.

Further details are expected on 2017 import tariffs by the end of the month.

DDG tariffs

And DDG imports will also face higher tariffs, at least from the US, the main supplier.

Earlier this month, the Chinese government increased anti-dumping tariffs on US DDGs, to range between 42.2% to 53.7%, with additional anti-subsidy tariffs of between 11.2% to 12.0%.

This is an increase from the anti-dumping duties of 33.8%, and the anti-subsidy tariffs of 10.0 to 10.7% imposed in preliminary measures back in September.

This ramping up of tariffs on key US exports comes at a time when fears of a trade spat between the world's two largest economies grows, after the inauguration of President Donald Trump, who has in the past pledged increased tariffs on China in response to what he considers currency manipulation by the country.

On Monday Citigroup warned that Mr Trump was headed for "antagonist relations" with China, with a likelihood of increased trade friction, based on his previous rhetoric.  


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