March 23, 2018 / 10:59 AM / in 3 months

U.S. pork to feel further chill from China tariff threat

BEIJING (Reuters) - China’s threat of steep tariffs on American pork imports will put further pressure on an industry already facing weaker demand from the world’s top buyer of the meat.

FILE PHOTO: A butcher cuts a piece of pork at a market in Beijing, China, March 25, 2016. REUTERS/Jason Lee/File Photo

Beijing said on Friday it was considering levying an additional 15 percent tariff on U.S. products including dried fruit, wine and steel pipes, and an extra 25 percent duty on pork products and recycled aluminum in response to U.S. tariffs on steel and aluminum.

Some industry participants said the tariffs and the threat of a brewing trade war between China and the United States would create more Chinese demand for European pork exporters, who have boosted supplies to China in the last two years after sanctions on Russia closed one of the region’s key markets.

“Even without the tariffs, with such low prices, we will use more domestic pork for our Chinese business,” said Luis Chein, a company director at WH Group, China’s top pork producer and its biggest importer of U.S. pork.

WH Group has also been increasing its supplies from South American and European countries in recent years, said Chein.

Rapid expansion of large-scale pig farms in China has been boosting domestic supply and lowering production costs. As a result, China’s pork prices are currently hovering around 10 yuan ($1.58) per kg, their lowest level in nearly four years and already squeezing demand for imports.

It is not yet clear if or when China will implement the tariffs in response to U.S. President Donald Trump’s plans for tariffs on up to $60 billion in Chinese goods.

Even so, overall Chinese pork imports are set to fall by as much as 30 percent this year because of the decline in domestic hog prices, said Feng Yonghui, chief researcher with industry website Soozhu.com.

“Currently U.S. pork doesn’t have much of an advantage,” said Feng.

An importer based in eastern China’s Shandong province said: “With those tariffs, we wouldn’t import U.S. pork. We would just import from Germany and Denmark.”

China plays a valuable role in the global pork market because of its demand for “variety meats” - pig feet, elbows and offal - which have little value otherwise.

The United States was by far its biggest overseas supplier of those parts last year, shipping 416,000 tonnes, worth $874 million. Germany was a distant second with 147,000 tonnes, according to Chinese customs data.

Total U.S. pork exports to China were worth $1.16 billion.

“This [tariffs on U.S. pork] will have a big impact on our import trade but our company also does domestic pork so overall the impact is not so bad,” said an import manager at Beijing Changxinchang Food Products Co Ltd.

Reporting by Dominique Patton; Additional reporting by Beijing Newsroom; Editing by Tony Munroe and Tom Hogue

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