Covid Curbs Impact the Chinese Masterbatch Prices

The lockdown in China is hampering the supply chain of Masterbatch despite muted peak sessions. China's export-driven economy from Masterbatch and other polymers is set to get poorly impacted by the slowdown in global trade and manufacturing process. Because of both sides' restrictions on energy supply, either voluntarily or unintentionally, the global economy is suffering from high inflation and country-specific central bank's controlling measures with an intermittent increase in interest rates.

The Chinese economy has slowed down sharply over the past year due to a deepening real estate slump and weak consumer spending activities. As China's Covid restrictions continue, economists worry that more manufacturers and service providers will lay off workers and slash wages to cut costs of Masterbatch production. The supplies of Masterbatch from and to the Chinese market were bottlenecked because the Covid lockdown affected the supply chain.

On the cost side, the auction price of raw coal tar has weakened, relieving further pressure on the cost of black carbon manufacturers. Still, the performance of downstream pigment products needs to be improved. The freight charges from and to the country were observed to be decreasing in the Chinese market, which was one of the reasons for the prices of Masterbatch's decline.

In the downstream market, the tire sectors were running at low loads, which caused the companies in the primary market to slow down the delivery of their finished products, and the market performance continued to lag. As domestic demand remains weak and export orders are limited, tire companies have high inventories, indirectly resulting in Masterbatch's stockpiling. Since tire inventories are high, future market demand expectations could be more optimistic, and tire manufacturers will continue to control production and reduce their inventory levels. Tire manufacturers continue to struggle with the demand for upstream feedstock Carbon Black thus impacting the cost of Masterbatch.