Chinese Plastics market sees buoyancy in March after two weeks of stagnation

Asian polymers prices started to recover in March after witnessing stagnation in demand during the second half of February. The war fuelled demand for commodities translated into a rise in input costs for manufacturers of Plastics by the first week of March. Monomer prices witnessed a sharp surge during the first week of March as Naphtha prices in the Asia Pacific region increased by over USD 120/MT. The cost pressure from upstream crude oil prices left no cushion for the refiners to absorb the cost shock, even partly, as naphtha crack spreads converged to historic lows by the last week of February.

Polypropylene (Homopolymer) prices rose by 8% as assessed on 8th March 2022. Polymer Grade Propylene (PGP) prices could come under further pressure in the second week as WTI touched the USD 130/b mark as of Monday the 7th of March. The PGP market saw no respite from the alternative feedstock, LPG prices as spreads of propane dehydrogenation plants continue to deteriorate. Average LPG prices in China saw an increase of close to 20% in the first eight days of the month. Spot resin purchases improved since the tail end of February as downstream moulders and compound manufacturers resorted to spot buying in expectation of higher future prices come March. Refiners too have resorted to stocking up Crude Oil in the first week of March which contributed partly to the sharp rise in prices of Crude Oil.

Ethylene monomer prices have also risen sharply since the mid-first week owing to a sharp price hike in downstream Naphtha prices. Spot purchases of High-Density Polyethylene (Blow Moulding and Film grades) improved since the first week of March while spot trade-in Low-Density Polyethylene (LDPE) and Linear Low- Density Polyethylene (LLDPE) film grade observed a sharp V-shaped recovery by the tail end of February. PE imports from South Asia, Southeast Asia and the Middle East continued to suffer from persisting supply chain disruptions on a global scale. Chinese exports of PP to Europe via the China Railway Express (CRE) have taken a hit due to the ongoing war in Eastern Europe.

The demand for plastics is expected to further rise in the coming few weeks as the war in Europe sees no signs of de-escalation. ChemAnalyst’s forecast for the Oil and Gas market had been further revised taking into consideration the latest developments in Europe and the rest of the world. As per our latest assessment, Oil and Gas markets may not see any relief till mid to late April. Thus, the input costs for plastic manufacturers are expected to add further cost pressure on the prices of plastics even as the raw material costs have significantly increased the prices of PP and PE in the Asia Pacific region in general and the Chinese market in particular.