Chemicals dearer on Chinese curbs

The Chinese government's crackdown on exports is set to push up the prices of chemicals, pharmaceutical raw materials, furniture and certain wood products imported from that country.

The Chinese exporters, who operate on thin margins, may either further slash their margins or are likely to pass on the extra cost to importers, thanks to the end of rebates on exports of around 2,500 products, effective July 1.

However, some Indian sectors, such as textile exports, are set to benefit from the Chinese curbs, making the domestic apparel exports price-competitive compared with those of China. Exporters in sectors such as textiles are likely to offset their losses, owing to a rising rupee, following the Chinese clampdown. At the same time, importers of Chinese goods may have to let go some of the gains of an appreciating rupee.

China's ministry of finance announced a series of export tax rebate adjustments on June 18. These adjustments will affect about 37 per cent of China's exports.

Starting July 1, the export tax rebate on 553 types of products, including cement, salt, leather, certain wood products and fertilisers, will be abolished. In the meantime, rebates on 2,268 products, including apparels, toys, plastic products, rubber products and furniture, will be reduced by varying degrees.

The prices of pharmaceutical raw materials are already high and the move to cut the rebates will only add to the import cost. Traders believe that an additional burden will have to be borne as the domestic drugmakers depend on China for raw material supply.

Janak Ladhani, director, Sonkamal Enterprises, said chemicals imported from China would be costlier by around 10 per cent as the rebate on chemicals imported by India would be slashed by 8 per cent to 5 per cent from the earlier 13 per cent.

Booking rates for most of the chemicals are quoting higher. Meanwhile prices of acetone and phenol have shot up from Rs 47 a kg earlier to Rs 56 a kg after the government imposed the anti-dumping duty on cheaper imports of the chemicals from the United States, the European Union, China, Taiwan, Singapore and South Africa. The government had imposed the duty on the basis of the findings that Acetone had been exported to India below its normal value, hurting the domestic industry.

After the government's duty, domestic manufacturers such as Herdilia Chemicals and HOC are expected to raise the prices of the chemicals.

Prices of another benzene-based chemical, phenol, went up from Rs 75 a kg two months ago to Rs 82 recently. International prices of the chemical have flared up by nearly 50 per cent during the period as some of the big plants were closed for maintenance.