Price increases expected for Chinese chemical goods

China has been employing a number of different strategies to address overheating export growth and to manage its ballooning trade surplus. One of these measures is to revise the value-added tax (VAT) refund rates which are given to companies that export goods out of the country. Effective July 1, China slashed rebates on 2,831 types of products. A lot of them have the potential to significantly impact the cost and/or availability of pigments, pigment intermediates, resins and other chemicals used in printing inks which are exported from China to Europe.

The Chinese VAT rebate has been reduced or eliminated for exported chemicals that contribute to pollution, have high energy consumption or are resource-intensive.

Additionally, in advance of the 2008 Olympic Games in Beijing, more than 3,000 chemical operations, most of them in the organic chemical sector, have been shut down because they are deemed to contribute to pollution. This is likely to result in severe shortage of certain printing ink raw materials.  Because both intermediates and finished products are affected, even companies that do not buy directly from China could be impacted through domestic suppliers that use chemicals exported from China.

The British Coatings Federation expects shortages and significant cost increases for all member companies.