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Chinese producers cut PET offers further amid coronavirus outbreak

by Abdul Hadhi -
  • 12/02/2020 (03:59)
PET suppliers in China have decreased offers further as the spread of the coronavirus has been increasingly impacting the industry. Delays in plant restarts and logistics have diminished buying requirements while cheaper feedstocks have reduced cost support.

Several Chinese producers have cut both export and domestic offers by $20/ton for PET resin this week, traders said.

Export, local PET offers down from pre-holiday levels

Export prices on FOB China basis are down about 3% from three weeks back, before the Chinese New Year holidays, while domestic prices are about 7% lower on ex-warehouse China basis, according to ChemOrbis Price Wizard.

The unexpected factor: coronavirus

“With the coronavirus pandemic still raging, demand, as anticipated, has slumped. Besides the bearish demand, there continues to be issues with land transportation, which is not fully operational. Hence, there are insufficient trucks to carry goods from suppliers to buyers,” a domestic trader explained.

To combat the spread of the coronavirus outbreak, China extended the Chinese New Year holidays, which led to delayed restarts at plants and businesses. Related quarantine measures and large scale lockdowns delayed the return of workers to facilities and created logistics breakdowns.

Rising inventories ensue

“It is difficult to see any uptrend in the near term due to high inventory pressure. Most of the downstream buyers are still in holiday mood and demand recovery is slow. So, suppliers have lowered down their operating rate to reduce sales pressure,” a source at a local producer lamented.

Taiwanese, S. Korean producers follow suit

Taking the lead from the Chinese market, Taiwanese and South Korean producers have either lowered or rolled over their export PET bottle offers.

A regional source said, “We have lowered our offers by $10/ton for late February to early March shipment as Chinese producers have started to aggressively cut offers.”

Weak PTA, low winter demand add to pressure

“Lower feedstock prices of PX, PTA and MEG amid weaker crude have added downward pressure on PET prices,” a source at a South Korean supplier said. Cheaper PTA has lowered feedstock cost for producers, prompting buyers to seek lower PET offers.

PTA prices on CFR China basis have slumped some 8% over the past two week, according to ChemOrbis Price Wizard.

The coronavirus outbreak and weaker feedstock prices also come at a time which traditionally sees lower demand. As opposed to summer when soaring temperatures create demand for soft drinks, which are often packaged in PET bottles, buying requirements are usually less during winter.

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