Chinese sellers increase focus on PP, PE, PVC exports

Traders are seeing a supply slack in China, as domestic demand has been buffeted by the recent lockdowns. This has been pushing sellers to shift their focus more to export markets, mainly Southeast Asia and Turkey, to relieve their supply pressure at competitive prices in these destinations, as long as port operations remain unscatched.

China’s surplus hits SE Asian markets

South East Asia is the primary address to bear the brunt of excess supplies in China, needless to say. This week, local polyolefin stocks inside China have run down to around 850,000 tons from 1 million tons of last week, as a result of Chinese sellers’ increased focus on exports and re-exports in the past two weeks.

“There is supply pressure on both PP and PE markets in China as lockdowns have hit local demand. We are focusing more on our export markets, where demand is much stronger,” said a trader in China. Players do not report major disruptions from Chinese ports, as they remain operational despite the lockdowns, although massive testing results in some slowdown.

The PP market has seen Chinese offers showing up at lower prices, exerting pressure on other suppliers. “Looking at the current oil prices, we think only coal-based producers are making profits,” another trader noted.

The lower domestic market also resulted in closing China’s markets to more expensive import shipments. “The cost of imports is around CNY9400/ton, about CNY600/ton higher than the current domestic prices,” the trader added.

The PE market in Southeast Asia, therefore, has witnessed more re-exports from China with prices undercutting regular suppliers by $20-50/ton. In a bid to relieve stock pressure, Chinese traders have been shifting their imports to Southeast Asia, where better netbacks are available.

A very low offer for a US-origin HDPE film for re-exports from China was noted at $1330/ton CIF Vietnam, standing at least $30-50/ton below the low end of the market.

The PVC market in India also sees pressure from Chinese cargoes as carbide-based offers from China have limited the import PVC price rise recently.

These offers are standing at least $100/ton below the prevailing market level and traders expect adequate supplies of Chinese acetylene-based cargoes to keep prices under pressure across South Asian markets.

China-Turkey arbitrage window remains open for PP, PVC bulk shipments

The rally in Turkey’s PP markets has lost steam over the past week, after reigning the markets for around three months. Players mostly blamed fading demand amid the wild swings in upstream chains, following the panic buying seen in early March.

Adding to the scenario was the ongoing presence of export PP cargoes from China. Last week, Chinese homo-PP raffia and fibre prices with break-bulk shipment terms were offered $50/ton below regular Middle Eastern offers, with bids standing at much lower levels.

Chinese PP offers see limited interest

Although the gap between the two markets remains wide enough, sky-high freight rates for container shipments do not leave much margin for sellers and therefore, they prefer to offer bulk shipments, which are relatively cheaper.

Buyers are largely shying away from these cargoes amid uncertain delivery terms and break-bulk shipments. Thus, they remain hesitant to commit to these cargoes offered in bulk unless the price offers a very competitive edge like more than $100/ton below the prevailing market level.

Turkey’s PVC markets has also been seeing an increased amount of Chinese PVC cargoes, forming the low ends of overall ranges.

Again, interest in these bulk cargoes is not great, but they do form a cheap alternative to other dutiable origins as well as European origins, which are offered $100/ton above the landed cost of Chinese cargoes in the midst of supply tightness.

Some players even argue that more Chinese cargoes may find their way to Turkey, if PVC prices continue to rise in April given higher European markets.