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China tariffs threaten US resin boom
American Shipper
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The nascent boom in resin exports met another obstacle in August when China imposed tariffs on resins and other plastics as part of its escalating trade war with the Trump administration. This development has yet to play out in full but could result in China imposing further tariffs in early 2019 to retaliate against the US following yet another round of tariffs that are scheduled to take effect on January 1.

Spurred by massive investments the past few years in the production of resins from low-cost shale gas in Texas and Louisiana, ports on the Gulf, East, and West coasts have confidently predicted a bright future in shipping resins to destinations in Asia, Europe, and Latin America. The boom was supposed to start in 2017, but Hurricane Harvey delayed completion of some of the plants in Texas. Early predictions had exports increasing 50 percent by the of 2019 and doubling by 2022.

Now the immediate future of resin exports, which were expected to be a staple of container lines in the coming years, is uncertain. “Nobody contemplated the tariffs,” said Ed Zaninelli, president of Griffin Creek Consulting, who specialized in exports when he was an utive at OOCL. Unlike the US, which can impose tariffs on hundreds of imports from China, the Asian nation is limited largely to targeting commodities and scrap products from the US, he noted, so additional tariffs on resins are possible if the trade war continues.

Asia, at 36.6 percent, is the largest market for containerized resin exports, according to PIERS, a sister product. Latin America is second at 25 percent, followed by North Europe, at 16 percent, and the Mediterranean, at 10 percent. Resin exports increased 4.4 percent in January through July to 384,523 TEU, according to PIERS. Resin exports actually declined 8 percent in January through July 2017 compared with the previous year. Therefore, although this year’s growth cannot be considered a boom, it indicates that exports were indeed on the ascent before the first round of tariffs were implemented this summer.

With the production plants in the Gulf that were delayed last year coming online this summer, exporters, shipping lines, and ports on all three coasts were gearing up for sustained, if not accelerating, growth in the years ahead. Joel Morales, senior director, polyolefins, Americas, at IHS Markit, told the World Petrochemical Conference in Houston in March that a second round of export growth will occur over the next few years if 19 new resin-producing plants scheduled for construction in the Gulf states are actually built.

Gulf and East coast ports are best situated for resin exports because they have a number of weekly services to major markets in Europe and Latin America. The East Coast also has a number of services to Asia via the Panama and Suez canals. West Coast ports dominate in the Asian trade, with some 40 weekly services from Los Angeles-Long Beach alone, but they do not serve as gateways to Europe or South America for resins.

Houston — US resin sector capital
Houston, which is located in the heart of the resin-producing region, handled 41.4 percent of resin exports in the first seven months of 2018, according to PIERS. Gulf Coast ports, including Houston, New Orleans, and Mobile, accounted for 56.8 percent. The East Coast’s share was 27.6 percent, and the West Coast’s share was 15.5 percent.

Although inland transportation costs from resin plants in the Gulf to Houston, New Orleans, and Mobile are lower than intermodal rail to the East and West coasts, their share of the US-Asia trade is limited. Gulf ports have only three weekly liner services to Asia. Those services fill up quickly, and carriers are in no rush to expand their services. Carriers launch new services based on imports, which command the highest freight rates, versus exports.

Although resin producers in the Gulf prefer to ship through ports in their region when vessel space is available, the extensive but higher-cost intermodal rail service from Texas and Louisiana to the East and West coasts gives exporters options. “We don’t believe any one supply chain option is the solution,” Doug Craven, assistant vice president for industrial chemicals at Union Pacific Railroad, told the World Petrochemical Conference. For example, Dallas, as an import hub for the region, generates empty marine containers that can be loaded with resins and carried by rail to Charleston and Savannah or to Los Angeles-Long Beach for export.

Each port region that will play a role in handling growing resin exports is doing its part to prepare its infrastructure and transloading capabilities. This ranges from transloading facilities being built at Charleston and Savannah for resins that are railed there from Texas and Louisiana, to the deepening of the Mississippi River ship channel in New Orleans to handle larger vessels from the resin plants located between New Orleans and Baton Rouge.

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