Demand for solvent-grade mixed xylene has come to a near standstill this week as the product shares the same code for imports as mixed aromatics, which is expected to have a consumption tax imposed some time between May 1 and July 1, market sources said this week.
Solvent-MX and mixed aromatics share the same harmonized system (HS) code for imports and exports, 270750, and that is problematic for importers in China as they do not yet know if the consumption tax will also be imposed on solvent-MX, or only on mixed aromatics.
Solvent-MX and mixed aromatics are traded as different products, despite sharing the same HS code.
Solvent-MX is primarily used to produce solvents, pesticides among others, but may also find its way into the gasoline blending pool if the blending economics are favorable. Mixed aromatics is mainly only used as a blending component in gasoline.
"I think now no one wants to buy solvent-MX [due to] the consumption tax," a Chinese trader who regularly imports solvent-MX said Wednesday.
Separately, a South Korean producer of solvent-MX affirmed there were no discussions for buying or selling of cargoes in the market this week as market participants were waiting for clarity.
China is widely expected to levy consumption taxes on mixed aromatics and light cycle oil, a move that will likely curb inflows of those products and stem surging oil product exports, S&P Global Platts reported previously.
Although there has been no official confirmation, market participants expect details to be released some time between May 1 and July 1.
Importers of mixed aromatics, light cycle oil and bitumen blend may have to pay Yuan 1,000-2,000/mt more for importing those products, which is expected to significantly reduce the imports, Platts reported.
China's imports of mixed aromatics have surged in recent years, as it is currently free of consumption tax. China's mixed aromatics imports jumped 81.4% year on year to 11.7 million mt in 2016, General Administration of Customs data showed.
Out of this, only a small portion is solvent-MX, as China's annual imports are estimated to be in the range of 200,000-300,000 mt.