While the trade and customs tariffs’ warfare between the United States
and China is rising, Middle Eastern countries, including Iran, are emerging as potential beneficiaries of this trade war.
If China applies its 25% tariff on imports of PE and liquid Propane from US, Chinese buyers may go to other suppliers to buy cheaper petrochemicals. In the meantime, the Middle East, with its huge supply of energy and the supply of petrochemicals, can be a good alternative to the petrochemical sources from the United States.
According to the “Goldman Sachs”, the Middle East is currently the largest source of Chinese polyethylene supply and can further expand its exports volume to the country.
This American Investment Banking Group beleives that, the Chinese buyers of 2.3 million tons of PE from US may be forced to import the supply from other countries by the next year if the tariff will really increase.
Goldman Sachs’ s statistics show that, China imports 12.7 million metric tons of polyethylene per year, with only 600,000 tons from the United States. But in the absence of tariff increases, the purchase of Chinese polyethylene from the United States will have a growth potential of over 300% over the next two years.
According to Ongh Hanwi, an analyst at the FGI Advisory, Iran, in particular, could be one of the potential beneficiaries of the trade war between China and the United States, as the country could sell gas at a lower price than regional contract prices. Gas prices are important because gas is the main source of energy for petrochemical complexes.
He added Iran is an attractive alternative. Chinese companies will have to diversify their raw materials supplies of and tend to rely more on Iran.
About Goldman Sachs
The Goldman Sachs Group, Inc. is a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and individuals. Founded in 1869, the firm is headquartered in New York and maintains offices in all major financial centers around the world.
