Paraxylene left out of Asia's RCEP trade deal

Paraxylene (PX), the raw material for purified terephthalic acid that is widely used in the polyester and PET sectors, has been left out of the landmark Regional Economic Comprehensive Partnership agreement that 15 countries earlier this week agreed on .

China's schedule of tariff commitments does not show the inclusion of PX in any commitment of tariff reduction or elimination for imports from South Korea and Japan, with import tax remaining at 2pc. The import tax will be gradually reduced for other aromatics products such as benzene, toluene and isomer-grade mixed xylene from the current 2pc to zero over the next 15 years from the two countries.

The reason for the exclusion of PX is unclear but China has invested billions of dollars over the past decade to build its manufacturing capabilities. These include the refinery projects of Hengli Petrochemical as well as Zhejiang Petrochemical.

Among the 15 countries that concluded the RCEP trade deal, Japan and South Korea are the only two countries whose PX will continue to be subjected to import tax. There are no PX production capabilities in Australia and New Zealand. India also exports significant amounts of PX to China but India pulled out of the agreement last year on fears that the removal of trade barriers would negatively impact its domestic industries.

China's PX consumption accounts for about 60pc of global capacity and 85pc of northeast Asia capacity. South Korea and Japan accounted for more than 54pc of China's PX imports in 2019. But this dropped by 6pc in 2020 with Brunei as the fourth largest supplier after Hengyi started its PX unit in late-2019 and shipping deliveries to Yisheng Petrochemical's PTA units.

The China-South Korea free-trade agreement signed in 2016 had also excluded PX.

China will continue to increase its share of PX production capacity in the next few years as domestic supply continues to lag demand even as the Asia-Pacific enters a prolonged period of excess capacity. China imported about 15mn t of PX in 2019 and 10.6mn t in January-September this year.

Free-trade agreements between China and the Association of Southeast Asian Nations already allow Chinese PX imports to enjoy zero import tax when the products are exported from countries including Indonesia, Thailand, Malaysia, Vietnam, Singapore and Brunei.

By Suzi Shin

China&#39;s PX imports 2019-2020 Kilo tonnes Partner countries 2019 % Partner countries Jan-Sep 2020 % World 14,981 100 World 10,638 100 Korea 6,041 40 Korea 3,914 37 Japan 2,098 14 Japan 1,320 12 India 1,275 8 India 1,060 10 Taiwan 994 7 Brunei 943 9 Saudi Arabia 943 6 Taiwan 790 7 Singapore 672 4 Thailand 448 4 Thailand 600 4 Oman 384 4 Oman 549 4 Singapore 359 3 Vietnam 404 3 Vietnam 325 3 Kuwait 391 3 Malaysia 300 3 Malaysia 378 2 Kuwait 266 2 Indonesia 276 2 Saudi Arabia 229 2 Iran 227 2 Iran 226 2 Source: Global Trade Tracker

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