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QuarterlySSESSMENTS: Q2 2020 China PS Prices

Author: SSESSMENTS

  • Price movements in Q2 2020 took cues from feedstocks prices, supply hiccups
  • Downstream demand was generally on a soft note
  • Pricing outlook firm on supply shortage, firmer energy markets

Coronavirus pandemic has caused devastating ripple effects and significant disruptions to China polymers industry as it began its relentless march around the globe earlier this year. During the second quarter of 2020, SSESSMENTS.COM pricing database showed that China’s domestic and import PS prices were primarily taking its cues from global crude oil futures as the pandemic has set in motion a major economic crisis, leading to an extremely sharp drop in fuel demand. In April, Coronavirus pandemic and Saudi-Russia oil price war delivered a one-two punch for local prices. In the first week of April, most Chinese traders and producers quoted higher offers for PS grades to the domestic market, with a range of increase between CNY300-400/ton ($43-57/ton) week-on-week, driven by rising crude oil and futures prices. Local PS prices were continuing their trend in the following week, riding on strong gains in the futures market. In the particular week, most suppliers initiated a hefty price increase of between CNY500-600/ton ($71-85/ton) for local cargoes on a week-on-week basis. However, the uptrend was short-lived as crude oil prices collapsed into negative territory for the first time in history, stirred by the pandemic crisis and Saudi-Russia price war. In the second half of April, China’s domestic PS prices were mostly captured on a downtrend, with a total reduction of between CNY400-500/ton ($57-71/ton) on a weekly basis. From the import market, China’s import PS prices in April gained a cumulative increase of $10/ton. Considering the pessimistic market conditions and an unprecedented drop in demand, most customers in China were placing bids at a few hundred lower than the initial offer level.

In May, SSESSMENTS.COM was informed that local PS prices in China went on a rollercoaster ride. In the first week of the month, China PS market began trading activities on a positive note after the Labor Day Holiday (May 6). On a weekly basis, local offers for PS grades were mostly up by CNY200-300/ton ($28-43/ton). However, the uptrend in local prices could not prolong to the second week as there were no strong demand fundamentals to support the price hikes, coupled with a sharp downturn in the monomer prices. In the particular week, most sellers in China set off a round of price cuts, with a total reduction of between CNY50-300/ton ($7-43/ton). In the second half of May, China's domestic PS market regained its momentum as supported by higher demand from the local market amid "one head, one helmet" policy, with a range of increase between CNY250-300/ton ($35-43/ton) week by week. From the import market, China’s import PS prices were largely stable, with most deals concluded at the initial level or lower by $40/ton as some suppliers willing to entertain requests for discounts. 

China’s domestic and import PS prices gained some ground in the first half of June, finding support from rising feedstock prices, coupled with tight availability of spot cargoes. However, the gains in local prices were capped by lower demand growth ahead of Dragon Boat Festival Holiday, which falls on June 25 and lasts until June 27. In the first half of the month, China’s domestic PS prices were mostly captured on an upward trajectory, with a range of increase between CNY50-200/ton ($7-28/ton) on a weekly basis. However, in the third week of June, China’s PS market slowed down ahead of the Dragon Boat Festival holiday as manufacturing activity dwindled, limiting trade activity in the country. In the particular week, most suppliers in China maintained or slightly lowered their local offers by CNY50/ton ($7/ton) from a week earlier. From the import market, China’s import PS prices in June recorded a cumulative increase of between $20-40/ton as crude oil prices continued its bullish run, extending a slow but relentless rise after falling into negative territory in April.

China PS market continued to face immense downward pressure in Q2 2020, with coronavirus as a key factor affecting the buying sentiment, hitting the country hard in its second wave. China, one of the world’s largest polymers market, continued to face unprecedented challenges and uncertainties amid the virus outbreak that started sweeping the country in late December 2019. As the number of new infections in China has tailed off, Chinese officials were taking tentative steps to chalk out an economic revival strategy. The government allowed businesses and manufacturers to resume operations from early April under strict guidelines after the months-long lockdown grounded its economy to a halt. Despite the country appearing to have its outbreak under control in March, the majority of buyers in China preferred to source the materials on a hand-to-mouth basis amidst tepid end-product demand and pessimistic economic conditions. Besides, most buyers anticipated greater falls in prices as crude oil prices remained stuck at record lows. After several weeks of buying on an as-needed basis, demand saw a slight uptick in the final week of April as most converters started to build up inventory levels ahead of the Labour Day holiday. In May, overall downstream PS consumption in China had not yet to show signs of recovery from the fallout of the pandemic crisis despite crude oil prices bouncing up from historic lows in April. In June, some converters saw a gradual increase in demand from the home appliances and automobiles sector. Despite a slight increase in demand, most buyers were still on a cautious stance and refrained from purchasing materials in bulk as growing concerns over the second wave of Coronavirus infections hit China’s economy. In the final week of June, activity in the China market was quiet, with limited spot trades taking place as most market players left their desks for the Dragon Boat Festival holiday (June 25-27). 

SSESSMENTS.COM data showed that supply in China’s domestic PS market remained tight since May on the back of a slew of turnarounds scheduled at local plants, coupled with striking demand for certain products. For most of the quarter, most downstream factories in China were running at an average rate of around 50% from the normal output due to falling export and domestic orders amid prolonged pandemic disruptions. On plant news, BASF-YPC Company Limited brought its PS plant on-stream on June 16. Located in Jiangsu, China, the plant with a capacity of 200,000 tons/year was shut on May 5 for maintenance purposes.

Looking into the third quarter of 2020, market participants voiced out to SSESSMENTS.COM that the possibility of PS prices to increase further remains high despite the market entering a seasonal lull in July, taking into account the relentless rally in energy markets and limited spot cargoes

Range of local PS transactions in April on cash, EXW China basis (including 13% VAT in CNY term, all equivalent in USD excluding VAT)

OriginProductTransaction TypeOffers (CNY/ton)Equivalent in USD/ton
ChinaGPPS InjectionOffer Given6,600-8,500833-1,073
ChinaHIPS InjectionOffer Given7,800-9,200984-1,161
South KoreaHIPS InjectionBid Received*7,000883
Description: *On FD basis

Range of import PS transactions in April on LC at sight, CIF China main port basis

OriginProductTransaction TypeOffers (USD/ton)
IndonesiaGPPS InjectionSold950
TaiwanGPPS InjectionOffer Given860-880
TaiwanGPPS InjectionSold860-880
VietnamGPPS InjectionSold800-850
VietnamGPPS InjectionOffer Given840
VietnamGPPS InjectionBid Received750-760
IndonesiaHIPS InjectionSold1,020
South KoreaHIPS InjectionSold950-970
TaiwanHIPS InjectionOffer Given950-970
TaiwanHIPS InjectionSold950-970

Range of local PS transactions in May on cash, EXW China basis (including 13% VAT in CNY term, all equivalent in USD excluding VAT)

OriginProductTransaction TypeOffers (CNY/ton)Equivalent in USD/ton
ChinaGPPS InjectionOffer Given7,300-8,700921-1,098
ChinaHIPS InjectionOffer Given8,300-9,4001,047-1,186

Range of import PS transactions in May on LC at sight, CIF China main port basis

OriginProductTransaction TypeOffers (USD/ton)
IndonesiaGPPS InjectionSold900-930
South KoreaGPPS InjectionOffer Given850-860
South KoreaGPPS InjectionSold850-860
VietnamGPPS InjectionBid Received800-820
VietnamGPPS InjectionSold800-820
South KoreaHIPS InjectionOffer Given970-980
South KoreaHIPS InjectionSold970-980

Range of local PS transactions in June on cash, EXW China basis (including 13% VAT in CNY term, all equivalent in USD excluding VAT)

OriginProductTransaction TypeOffers (CNY/ton)Equivalent in USD/ton
ChinaGPPS InjectionOffer Given7,800-8,500984-1,073
ChinaHIPS InjectionOffer Given8,550-9,2001,079-1,161

Range of import PS transactions in June on LC at sight, CIF China main port basis

OriginProductTransaction TypeOffers (USD/ton)
IndonesiaGPPS InjectionOffer Given950-1,020
TaiwanGPPS InjectionOffer Given910-920
IndonesiaGPPS InjectionSold950-960
South KoreaGPPS InjectionSold900-910
TaiwanGPPS InjectionSold910-920
VietnamGPPS InjectionSold900
MalaysiaHIPS InjectionOffer Given970-1,000
TaiwanHIPS InjectionOffer Given1,010-1,020
MalaysiaHIPS InjectionSold970-1,060
South KoreaHIPS InjectionSold1,020
TaiwanHIPS InjectionSold1,010-1,020

Tags: Asia Pacific,China,English,NEA,Quarterly,Styrenics

Published on July 10, 2020 10:00 AM (GMT+8)
Last Updated on September 12, 2020 2:20 PM (GMT+8)