China to raise import duty on US ethanol to 70%

In a tit-for-tat move, against the recent import hikes by the US on Chinese goods, China’s Ministry of Commerce says the import duty on US ethanol will be increased to 70% with effect from July, from the current 45%.

Other agriculture products such as sorghum, soybeans and wheat were also subjected to the additional 25% increase in import duty, from 45%.

With the higher import duty, it is expected that exports of US fuel ethanol to China will slow down.

The tariffs will neutralise cost savings from importing cheaper US ethanol versus domestic supply. Ethanol, an alcohol typically produced from corn or sugar, is often mixed with gasoline to reduce air pollution from vehicle emissions.

This may turn out to be good news for domestic producers, who are already ramping up output on cheaper corn and government subsidies.
But analysts said China will probably need to resume imports to meet the government target of 10% ethanol content in all gasoline nationwide by 2020.

The US is the largest supplier of ethanol to China, accounting for 85.8% of the 494,823 cu m imported by China in the first quarter.

China said last year the new ethanol mandate would boost industrial demand for corn and help clean up its choking smog. It would mean consumption of around 15 million tonnes/year of ethanol, made from 45 million tonnes of corn, according to Reuters calculations.

China’s current ethanol production is around 2.5 million tonnes/year.