x Abu Dhabi, UAETuesday 25 July 2017

Saudi rejects China methanol dumping claims

The statement from the Middle East's largest public company marked the latest round of an emerging trade spat with China.

Saudi Arabia does not subsidise exports of petrochemicals and did not "dump" products on the Chinese market, the Saudi Basic Industries Corporation (SABIC) said Sunday. The statement from the Middle East's largest public company marked the latest round of an emerging trade spat between China, Asia's largest oil consumer, and its second-largest supplier. The Chinese government announced late last month that it would investigate allegations that firms in four countries, including Saudi Arabia, had unfairly sold methanol, a common chemical, on the Chinese market at prices so low that they lost money on the shipments. The practice, called "dumping", is not protected by free-trade agreements.

"It should be noted that no protective fees are imposed on Saudi methanol and consultations are under way to refute arguments of dumping," SABIC said in a statement to the Saudi stock market. SABIC's reaction came as part of the Saudi government's denial of the charges, and provoked cautious statements from China that it would not impose penalties until it fully investigated the matter. "The judgement is preliminary," a Chinese embassy spokesman in Riyadh told Agence France-Presse (AFP) Sunday. "We take great consideration of Saudi concerns."

SABIC confirmed that China had not imposed any extra charges or tariffs on Saudi petrochemical imports. On Saturday, Abdulrahman al Zamil, the chairman of the Council of Saudi Chambers, denied the charges and told AFP Saudi exporters were worried they could be harmed in the time it took China to study the issue. The global petrochemical industry is in the middle of one of its worst slumps in history, as continued weak demand and the new production capacity hold prices low. Companies in Saudi Arabia have managed to stay afloat even as competitors in Asia and Europe said they were threatened with bankruptcy.

The Chinese ministry of commerce announced on June 25 that it would open an anti-dumping investigation into imports of methanol from Saudi Arabia, Malaysia, Indonesia and New Zealand. The investigation could take more than a year to complete, it said. Saudi petrochemical companies have long confronted charges that they have an unfair competitive advantage because they have access to low-cost feedstock from the kingdom's oil and gas production.

The issue was a major sticking point in the country's bid to join the World Trade Organisation (WTO) in 2005. The WTO finally agreed to fixed prices for ethane, a component in natural gas, and naphtha, a derivative of crude oil. "They all agreed to the rules that bind Saudi Arabia to the WTO," said Dr John Sfakianakis, the chief economist at SABB. "One can say clearly that Saudi petrochemical products are not treated with any incentives on the export market."

Dr Sfakianakis said it was still too early to draw any firm conclusions about the charges, but added it was unlikely to seriously affect the larger strategic relationship between the two countries. "I do not think this is going to cast any doubt over the Saudi-Chinese trade relationship," he said. SABB estimated that last year China imported about 116.25 billion Saudi riyals (Dh113.8bn) worth of goods, including oil, from the kingdom, while Saudi Arabia imported about 40.3bn riyals of goods from China.

* with agencies cstanton@thenational.ae