Morning Briefing - 14 June 2022
CommoPlast
Morning Briefing
14 June 2022
Brent: $122.27 (+ $0.26）
WTI: $120.93 (+ $0.26)
Naphtha CFR Japan: $812 (+ $1)
Ethylene CFR NEA: $1010 (Stable)
Ethylene CFR SEA: $1150 (Stable)
Propylene FOB Korea: $1030 (Stable)
Propylene CFR China: $1030 (Stable)
*Data represent closing prices of the previous trading day
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Following the partial lockdowns in Beijing and Shanghai, it wouldn’t be a surprise if the domestic polyolefins market in China returns to a downward trajectory. While buyers scramble to rearrange production schedules, especially those affected by the latest COVID-19-related restrictions, sellers are developing new sales strategies in response to the cloudier local demand outlook.
“Holding back on the stocks is no longer a viable strategy because the domestic market would need weeks to recover, and that is if the government does not plan to expand the lockdown. We need to watch out for export opportunities. A good thing is overseas markets are firming up,” a trader told CommoPlast.
As of the time of this report, Chinese sellers are more active in offering re-export LLDPE film cargoes to Southeast Asia than PP cargoes. Several trading houses commented on the situation, saying that at the current local prices, they are unable to offer export homo-PP below the $1200/ton [FOB China] threshold, which is deemed not competitive for many international buyers.
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We have been talking about inflation for some time and there is no better time to revisit this conversation than when the reduced spending power and changing consumption patterns are broiling a perfect storm for Asian manufacturers.
Last week, one of US major retail chains – Target said the company would mark down unwanted items, cancel purchase orders, and move quickly to get rid of excess inventory. Other retailers, including Walmart and Home Depot, are facing similar issues.
The key word here is "cancel purchase orders", and that is not good news for manufacturers. Late last week, a Chinese converter in the gardening equipment and outdoor furniture sector reported that their orders from the US and EU customers have plunged more than 50% compared to the same period last year. Meanwhile, the packaging sector is in mid of the traditional off-peak season, yet market participants can’t help but raise the question if the lack of demand would persist longer than it would normally be?
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