Summary:
- Philippines government extended the lockdown until May 15
- Stock Exchange Index plunged by 13.3%
- GDP growth rate projection may result in zero to -0.8% due to the lockdown
- Philippines’ Peso fell by 20 centavos against the US Dollars
- Philippines’ JG Summit has no official offers and waiting for buyers’ bids
- End products’ slow sales and sufficient inventory on hand dampened polymers’ demand
After 52 confirmed Coronavirus cases surfaced in the Philippines, the government implemented nationwide lockdown on Thursday night, March 12 in order to curb the spread of the virus. The lockdown was originally set to expire on April 13, however, as the issues have not been handled, the government decided to extend the lockdown until April 30. As of April 24, lockdown in the Philippines is extended to May 15. The measures will be modified in lower-risk areas, which led to a partial resumption of work, transport, and commerce. On April 27, SSESSMENTS.COM noted that there are 7,579 cases reported, raising the toll to 501.
The lockdown scenario has undoubtedly affected the economic sector. Hundreds of factories and businesses have been closed, placing tens of thousands of wage earners in financial peril. Remittances from Filipinos who work overseas, which account about one-tenth of the economy may decline by 30% this year as thousands of workers return home. On Thursday, March 19, the Stock Exchange Index plunged by 13.3%, closing the lowest level since January 2012 amid concerns that the government PHP27 billion ($528 million) fiscal package to bolster the economy and help citizens financially was not enough, as noted by SSESSMENTS.COM.
Forex counters at banks are also close mainly due to the shortage of labour. SSESSMENTS.COM was told that banks do not have enough workers to serve the forex service at the moment. Besides, forex service is not the priority, banks are more focused on withdrawal. Added to that, not all branches are open to service, only selected branches that are still running. If the selected branch is temporary close, the other branches will not accommodate. As such, it is quite complicated to do forex trading.
The lockdown extension also threatens the GDP growth rate projection. As businesses have severely affected, especially the tourism and retail sector, tax collections are lower than the original target. Based on the data collected by SSESSMENTS.COM, earlier this year, the government set a growth target of 6.5% to 7.5% for 2020. However, the lockdown in the entire Luzon which accounts for 73% of the country’s GDP, would result in zero to -0.8% growth.
On April 1, Philippines’ Peso fell by 20 centavos against the US Dollar, close at PHP50.88/ton per US Dollar from March 31’s level of PHP50.68/ton. The decline in the Philippines’ manufacturing gauge has caused the weaker local currency toward the US Dollar. The Philippines Purchasing Managers’ Index (PMI) has recorded its weakest performance so far in the monthly survey as factories brought off-stream due to the coronavirus. SSESSMENTS.COM noted that the Philippines PMI fell to 39.7 in March, down from 52.3 in February and 51.5 in the same period last year.
Based on the data collected by SSESSMENTS.COM, about 97% of the manufacturers in the Philippines have halted the production activity in the midst of lockdown. The remaining manufacturers are only running at 25% of the normal operating rate. Even if the factories gained approval to operate, workers are not able to work as the government restricts public transportation. Besides, there is congestion at the port. Imported cargoes are piling up day by day, but a very limited number of parties are clearing their cargoes. Delaying the shipment is the best option at the moment, since even though the customs are working, there are no trucks operating.
In the polymers market, the Philippines' JG Summit claimed that the lockdown has not affected the production activity at the producers’ plants, all running at normal capacity. However, the producer brought the company’s naphtha cracker off-stream on March 31 due to technical issues. The cracker unit with a capacity of 320,000 tons/year ethylene and 190,000 tons/year propylene was brought on-stream within the week commencing April 6. However, the producer does not have official offers since the market is totally muted. According to market participants, the producer is selling based on customers’ bids. Even so, SSESSMENTS.COM noted that the local market recorded zero demand, even zero inquiries. Trading activities reported stopping as soon as the lockdown was imposed. Since the beginning of April, there were no procurement activities and exact offers.
From the PVC market, General Chemical & Resin Consortium Inc (GenChem) has shut the company’s 20.000 tons/year PVC plant since March 17 as there is no transportation for the workers to reach the factory. During the lockdown, the producer asks the employees to take unpaid leave. At the same time, the company has not released any offers as the customers also halt the production activity. As the government has officially announced that the lockdown will expire on May 15, the producer is planning to bring the PVC on-stream on May 16. However, the plant would not run on a full capacity as checking for some problems and damages are needed, SSESSMENTS.COM was told.
Philippines market players told SSESSMENTS.COM that the polymers market in the country is on mute. Converters are unwilling to procure materials as demand for the end products is sluggish. Besides, converters are still having sufficient inventory on hand amid the reduced operating rate. Adding to that, many converters stated that health comes first before money and decided to close the factories. For manufacturers that are still operating, they are implementing all the measures to prevent the spread of the virus. Workers are reduced by half per shift. For those who are working, they get an additional salary of 20%. While for employees that cannot come to work, they will not receive the salary.
Looking ahead, considering the low crude oil prices, Philippines market participants believe that demand for resins will continue to drop and follow by a further decline in polymer prices. As such, the outlook for the polymers market remains gloomy in several months onwards, as stated to SSESSMENTS.COM.
