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Virus-impacted demand inflicts toll on Vietnam's PE market

by Abdul Hadhi -
by Başak Ceylan -
  • 18/02/2020 (04:06)
PE prices in Vietnam have come off after a short rally ahead of the Lunar New Year holiday as the impact of the COVID-19 outbreak on polymer industries offsets earlier fears of the reduced supply due to maintenance shutdowns.

Before the Lunar New Year holiday, there was a bullish sentiment lingering from the import offers, which had increased due to limited allocations ahead of plant shutdowns in the Middle East. In addition to the higher Middle Eastern offers, expectations of a stronger buying activity after the holiday also supported a firmer price outlook.

Vietnamese markets made a relatively strong start to the post-holiday period despite the bleak outlook cast by the coronavirus outbreak. The reduced availability, particularly for LLDPE, helped the attempts to push through increases. However, the early gains started to erode as more evidence of the impact of the virus began emerging.

COVID-19 impact adds to Chinese New Year lull

In Vietnam, the market traditionally experiences a lull in business activity during the lengthy holiday (also called Tet in Vietnam), which stretched from January 23 to January 29 this year. But this slowdown has continued and gotten worse in the wake of the COVID-19 outbreak.

Outside of China, Southeast Asian countries, including Vietnam, are among the hardest hit by COVID-19 in terms of both the number of cases of infection and impact on businesses due to quarantine measures.

Vietnam has significant border trade with China and lockdowns and logistical bottlenecks at its northern neighbor have disrupted supply chains.

Several of Vietnam’s businesses have customers in China. “The usual post-holiday schedule is customers flying over to China to discuss new contracts. But now, they want to delay until the situation gets better. I have no idea when they will come,” a Vietnamese end-product maker said.

“Many companies in Vietnam import raw materials from China. Due to the lockdowns and delays in transportation from China, they may have to cut down their production rates and this will affect the plastics market,” a Vietnamese converter said.

Downturn expected to continue

As the COVID-19 continues to spread, the impact on the PE is expected to continue. The converter also said, “Demand is weak overall. If the blockages last longer, prices will drop even further as demand will also decrease.”

According to media reports, Vietnam’s planning and investment ministry expects its 2020 GDP growth forecast to be lower by 0.55% at 6.25%, providing that the outbreak is contained within the first quarter. However, if the outbreak extends to the second quarter, the ministry expects growth to drop 0.84% to 5.96%.

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