Afflicted by high inventory levels and buyer’s anticipation of the long-awaited flood of new supplies, amid labour shortages affecting processors and manufacturers and anxiety over whether the government will take more economic cool-down measures; China’s polyethylene (PE) traders have started re exporting PE to Latin America as per ICIS.
Stock levels were heard to be at high levels in China pre-New Year Holidays, followed by reports of low stock levels as prices rose post-holidays. The price recovery lasted only a few days followed by three weeks of falling prices. Last Friday, ICIS pricing assessments showed further declines across all grades of polyethylene. Low-density polyethylene (LDPE) film-grade prices were down by a further US$30/ton to as low as US$1350/ton CFR China, HDPE film had slipped by ten dollars to US$1300-1390/ton CFR China.
This implies that inventories might have been high, keeping in mind cargoes already booked that had yet to arrive. As an indication of trader panic, resin that had been shipped to China is being re-exported to destinations as far away as Latin America. This type of trade could last a few more weeks or it could last until May, as per market grapevine. China often re-exports resin at times of market stress, but the fact that large volumes of shipments are being reported is worrying. The traders involved are going to lose money as container freight rates have recently risen on ship owners taking smaller and older vessels off-line in order to make the economics of big, modern ships work.
Resin buyers in China have recently reduced orders because they believe that the long-delayed new capacity surge is finally picking up momentum. Although many of the new plants in the Middle East and China have yet to stabilise production, they are selling more. Processors and finished goods manufacturers are reported to be unable to run at high rates because migrant workers have yet to return from the countryside following the New Year Holidays.
While the high house-price inflation number is a concern, the number of properties sold fell in January-February, suggesting measures already taken to slow the sector down - such as higher land sales taxes - are working.