25 June, 2018
Players operating in China’s polymer markets are expressing their concerns about the escalating trade tensions with the US, which have had a notable impact on the futures contracts as well as the yuan/dollar exchange rate since last week.
On June 18, US President Donald Trump requested the United States Trade Office to impose tariffs on another $200 billion worth of Chinese goods. The move came soon after the Trade Office released a list of Chinese products, including PE, PP, PET, PVC and PS, that will be subject to additional tariffs; to which China responded immediately by announcing additional 25% tariffs of its own.
As the trade war between the two countries escalated amid fresh tariff threats, the Chinese yuan fell to a five-month low against the US dollar on June 18. “The weaker yuan has hampered Chinese buyers’ purchasing power. Demand towards import PP and PE is quite low nowadays,” a Shanghai-based trader noted.
China’s futures markets have also been affected by intensifying trade-related worries. On June 22, September LLDPE and PP futures on the Dalian Commodity Exchange faced week over week drops of CNY260/ton and CNY255/ton, respectively. PVC futures posted a smaller loss of CNY40/ton.
A polyolefin producer in China opined, “The market sentiment is weak as buyers are not interested in building any extra stocks when PP and LLDPE futures are falling. We think that the escalating trade war with the US will continue to weigh on China’s polymer markets in the near term.”
A few traders in China reported that local prices for several polymer products, including PP, PE, PVC, PS and ABS, witnessed slight decreases from a week earlier given the weaker sentiment. “We are not feeling optimistic about the near-term outlook due to the current bearish indicators. China’s polymer markets are facing growing concerns about how the looming trade war with the US might affect demand,” a seller commented.
A South Korean trader lowered its PP and PE offers by $10-20/ton to China last week, noting, “Demand from China is quite weak nowadays since the weaker yuan as well as lower futures are hampering Chinese buyers’ appetite for fresh purchases.”
A trader based in Vietnam commented, “Our Chinese customers are placing lower bids for PE as they are hesitant to replenish stocks amid escalating trade tensions between China and the US.”
A Taiwanese producer cut its PS and ABS offers to China by $70-100/ton last week, with an agent of the producer saying, “Import prices have lost competitiveness in China given the depreciation of the yuan against the US dollar. Overall consumption is declining while softer upstream costs are also weighing on the market.”