Polymer traders in China are looking to export their imported cargoes, stored in bonded warehouses, in a bid to clear their inventory amid weak domestic demand, sources said this week.
"Prices of imported polymers are very high," said a China-based market participant. "We are unable to sell them in the Chinese market, so we are looking to re-export." Cargoes which are imported into China and exported from the bonded warehouses are referred to as "re-export cargoes" by the industry.
For high density polyethylene-film, traders were offering warehouse cargoes at around Yuan 10,500/mt, which is equivalent to $1,280/mt on import parity basis. But producers were offering the material at over $1,320/mt CFR China this week.
Amid lack of local buyers, sellers were heard to be exporting their bonded cargoes. One trader was heard to have sold a parcel of HDPE-blow molding from a bonded warehouse in China into Indonesia at $1,330/mt CFR Indonesia late last week, while in Vietnam, where polymer resins are not taxed, cargoes fetched $1,410/mt CFR basis.
One Chinese trader also reported moving a HDPE-film parcel from Shanghai to Spain at $1,500/mt CFR.
Sellers were also eying further destinations like South America or Africa. Arbitrage windows have opened from Asia to these regions, which has also prompted Northeast Asian polyolefins producers to offer more cargoes there. Producers said they were able to move polypropylene homopolymer at $1,600/mt FOB Taiwan/South Korea. A South Korean trading house offered "re-export" cargoes at $1,590/mt FOB China.
In Latin America, the weekly assessment for PP homopolymer was $1,725/mt Free On Truck Brazil, and $1,715/mt CFR Peru Wednesday. This is much higher than the $1,540/mt CFR Far East Asia assessment Wednesday.
"Imported cargoes are too expensive and we need to clear the high inventories," a Chinese trader said.
As buying failed to take off after the Lunar New Year holidays earlier in February, warehouse inventory has increased. Traders had expected the local market to rebound after the holidays, and had built up their inventories. But buyers have taken a wait-and-see stance, amid poor demand from end-consumers and the sudden spike in crude prices this week.
