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End of China’s ‘zero-COVID’ stance: Double-edged sword for Asia PVC, PP and PE markets

by Shibu Itty Kuttickal -
  • 12/01/2023 (02:45)
Asian PVC and polyolefins markets are searching for direction amid expectations that China’s lifting of most COVID restrictions would strengthen demand and trigger pent-up buying activity, which would also crimp availability to other Asian markets. On the other hand, the rising COVID numbers in China is prompting players to take a guarded view ahead.

“Consumers are apparently returning to markets in China, and this will strengthen the sentiment for polymers in Asia,” said a trader in China. “We are seeing buyers already in the market for PVC, PP and PE for the demand expected after the Chinese New Year (CNY) holidays later this month. But we should also be wary of the rising COVID numbers in China, and we still do not know if there is a clear path now towards demand recovery,” he added.
China has thrown open its borders as it ends its ‘zero-Covid’ policy ahead of the CNY on January 22. The withdrawal of border controls effective January 8 is one of the last steps of China’s gradual dismantling of its pandemic control regime that began last month. At the same time, media reports have suggested burgeoning numbers of COVID infections in the country, which also could reduce demand ahead.

Easing China curbs and rising infections: Impact on PVC

A representative of a South Korean PVC producer in China expressed her optimism about the outlook ahead, saying, “We expect prices to rise in the near term. There is no room for any more price cuts.” Her company suspended all offers as it had sold out all February shipments. “We’d closed our domestic offers last week itself,” she added. According to her, although shipping costs to India have fallen lately, “they are bound to increase after the CNY holidays”.

A trader in China said import prices of both its ethylene and acetylene-based PVC have been raised by $10/ton at the low end in the current week, while keeping the high end stable. This followed a very similar trend seen last week. Indeed, PVC prices have been on a stable to higher trend since mid-December following a sharp increase in early December across Asia.

PVC offers from China dry up in SE Asia

Import prices into Southeast Asia in the latest week are noted mostly stable following a $20/ton increase of last week. A PVC trader in Vietnam also said prices have stayed high as offers from China to Southeast Asia have dwindled but added that deals were difficult at the current levels. “Prices have stayed mostly stable. There are not many offers, and available offers are too high for us. We will wait as our inventory levels are comfortable for the current weak demand for end products,” he said.

Indian PVC market takes a breather after rapid increase

In India, a rapid increase in import prices of about 30% since the third week of November seems to be taking a breather as offers were stable from the previous week at $930-970/ton CIF. Late last week saw Japanese duty-free shipments being sold at $1020/ton CIF, or about $950/ton CIF for dutiable shipments, but traders said prices for the shipments had slid to about $1000/ton ($930/ton for dutiable cargoes) by early this week.

“After a sharp 30% increase in Indian import prices, the market is apparently taking a breather. There are also expectations of ample volumes booked in the previous months arriving late this month or early next,” a Mumbai-based trader said. “We may even see a slight decline in prices next week, but it’s unlikely for a price fall to be sustained for a prolonged period,” he added.

What seems emboldening India’s bullish proponents is a drying up of offers from China and the US.

“We are hearing selling ideas in the high-$900s/ton from China, at which levels Indian buyers are reluctant to accept Chinese shipments, especially as a government probe is ongoing into imposing safeguard duty on imports with a VCM content of more than 5 parts per million. And there are no US offers for January, because of an ongoing cold wave, and we do not know whether there will be any in February,” added a Mumbai-based source of a US trader.

PE, PP markets stay firm

As for the polyolefins markets, China seems to be stable amidst reduced supplies and demand, crimped by covid, while Southeast Asia have seen a visible increase this week following two weeks of slight firming.

Import PP prices in Southeast Asia have risen by $50-60/ton. Likewise, LLDPE prices are up by $30/ton while HDPE is the most bullish one rising by $40-60/ton this week. Supply was quite limited, especially from China, but suppliers from elsewhere also pointed to lower availability. “Orders are there but we do not have enough stocks. We can supply only minimal quantities to our contract buyers. We expect more maintenance shutdowns at Middle-eastern producers during the first half year. We expect prices to firm up further and see better demand after CNY, and limited supply,” said a representative of a Middle Eastern producer.

Meanwhile, a major regional polyolefins producer continued to run at low operating rates. “Our offers have been raised by $50-80/ton and we are still awaiting feedback from buyers. We expect prices to be stable to firm,” he added.

As for China, import PE and PP followed a firming trend in the first week of 2023. Supply limitations supported prices while the latest Covid wave hindered demand and caused labour shortage.

Import supplies stay tight

Import arrivals were dwindling, keeping prices firm.

“Import supply is tight. Many of the overseas producers are reportedly not under much sales pressure,” a trader said. “While demand could improve because of the lifting of COVID restrictions, we have seen a sizeable increase in the pandemic numbers recently and this may have a bearing on the market. The near term could see a stable market,” he added.
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