Chinese PP traders eye re-exports to ease inventory pressure

22 February 2011 10:29  [Source: ICIS news]

SINGAPORE (ICIS)--Chinese traders are seeking to re-export polypropylene (PP) in southeast Asia to bring down inventory, while domestic demand in China has remained weak, market sources said on Tuesday.

Different PP grades of various origins were offered for prompt re-export from Chinese ports, they said.

Middle East PP injection and yarn grades were offered to Indonesia at $1,650/tonne (€1,221/tonne) CFR (cost and freight) for prompt re-export from China, according to traders based in Indonesia.

Buyers in Indonesia that enjoy import duty exemption were likely to accept the re-export offers from Chinese traders, because these were cheaper than the material available within southeast Asia, market sources said.

Non-dutiable southeast Asian product were offered at a much higher level of $1,700-1,760/tonne CFR Indonesia for March shipment, they said.

A lack of material coming from the Middle East and northeast Asia would likely force the Indonesian buyers to turn to these re-export offers from Chinese traders, even if they are not exempted from import duty, traders said.

Saudi PP injection and yarn grades were offered at $1,630/tonne CFR Indonesia for prompt shipment from Singapore, but the volume was very small, they added.

PP injection and yarn grades of different origins were offered in Vietnam at $1,620-1,640/tonne CFR for prompt re-export from China, with discussions underway, traders in Vietnam said.

Chinese traders received large quantities of imported PP after returning from the Lunar New Year holidays in mid-February, but they have not been able to sell much of these materials because of weak domestic demand, Chinese traders said.

Many end-users in the downstream plastics processing sector have yet to ramp up production due to labour shortages, they said.

The re-export market offers higher profits too, they added.

PP yarn grade re-exported at $1,650/tonne CFR Indonesia would yield a CFR China equivalent price of $1,580/tonne, based on an estimated China-Indonesia freight of $50/tonne. But it is currently difficult to find buyers in China at $1,580/tonne CFR China, they added.

($1 = €0.74)

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By: Chow Bee Lin
+65 6780 4359



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