- No strong demand fundamentals to support prices
- Chinese exports fall as lockdown dents global trade
- Outlook remains pessimistic
As the number of new Coronavirus infections in China drops sharply, businesses are slowly resuming operations after the coronavirus lockdowns brought the economy to a screeching halt. In the domestic market, local GPPS Injection offers are hovering below CNY8,000/ton-level, while offers for local HIPS Injection cargoes have broken below the CNY9,000/ton-threshold level within the first half of April. However, in the final week of the month, local prices bounced back above the threshold level. On the week commencing April 6, most local producers and traders applied a price increase of between CNY300-400/ton ($42-56/ton) on GPPS Injection and HIPS Injection cargoes from a week earlier as higher crude oil prices sent monomer costs skywards. Local PS prices were continuing their trend in the following week, riding on strong gains in the futures market. On April 13, most suppliers initiated a hefty price increase of between CNY500-600/ton ($70-84/ton) for local GPPS Injection and HIPS Injection cargoes on a week-on-week basis as rally in PP futures prices has sent most commodities prices spiralling upward. However, on April 15, local PS prices took a breather as there were no strong demand fundamentals to support any form of price increase. As compared to Tuesday, April 14-level, producers and traders made the decision to lower their local offers between CNY200-300/ton ($28-42/ton). Moving to the third week, local sellers initiated a price reduction of between CNY400-500/ton ($56-70/ton) from a week earlier in response to the softer crude oil and SM prices. However, a producer maintained stable local offers from a week ago, citing a plan for maintenance and a rebound in crude oil and SM prices as the reasons for the decision. In the final week of the month, local PS offers edged higher between CNY100-200/ton ($14-28/ton) from last week’s level following an uptrend in monomer cost.
SSESSMENTS.COM’s pricing database noted that overall import PS prices to China tracked a stable to firmer trend during April. In the week commencing April 13, a South Korean producer instituted a price increase of $10/ton for GPPS Injection cargoes as compared to last week’s level as the producer recived a lot inquiries this week. In the following week, a Vietnamese producer rolled over offers for GPPS Injection cargoes on a weekly basis, available at $840/ton on LC at sight, CIF China Main Port basis. Considering the current market situation, most customers were placing bids between $80-90/ton lower from the initial offer level, which was rejected by the producer.
China PS market has been facing a larger drop in demand for raw materials in April as the majority of buyers prefer to purchase on an as needed-basis and adopt a wait-and-see stance amidst tepid end-product demand and pessimistic economic conditions. Moreover, most buyers anticipated greater falls in prices as oil prices remain stuck at record lows. On April 20, US crude oil futures sank below US$0 per barrel for the first time in history, amid a massive slump in demand due to coronavirus lockdowns. After several weeks of buying on a hand-to-mouth basis, demand saw a slight uptick in the final week of April as most converters started to build up inventory levels since the Labour Day holiday is drawing closer. On the production front, most downstream factories are running at an average of around 50% from the normal output due to falling export orders, as the spread of the deadly disease carried serious risks for the global economy. On the supply side, SSESSMENTS.COM noted that SM inventory in coastal China accumulated to 275,500 tons in the final week of April, a reduction of 14,400 tons from last week.
Entering May, the majority of market participants foresee that China’s PS prices will face mounting pressure from sour downstream demand. Despite the government’s efforts to get domestic production back on track, some sources believe that the global spread of the deadly virus will continue to cause a larger decline in demand for end-products in the export destination.
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