China petrochemical markets bearish; new COVID-19 wave hit hubs
SINGAPORE (ICIS)–Bearish sentiment hit China’s petrochemical markets at the start of the week as a new wave of COVID-19 outbreak hit production hubs in the eastern region.
- Shandong, Hebei provinces hardest hit
- Non-essentials factories in some cities to shut
- High crude prices weigh on industry prospects
Fresh curbs on people movement and business activity could affect factory operations and hamper deliveries.
Several major petrochemical hubs, including the provinces of Shandong and Hebei, have recorded sharp spikes in new cases.
The cities of Shanghai and Shenzhen were likewise experiencing rising new numbers of infections.
In Jilin province in the northeast, the capital Changchun has been placed under lockdown since 11 March.
In Guangdong in the south, the cities of Shenzhen and Dongguan have both announced a seven-day lockdown from 14 March.
Shanghai – which is a metropolis and China’s main financial centre – sealed off several communities to contain the virus.
The cities of Changchun, Dongguan and Shenzhen all have requested local factories producing non-essential goods, including petrochemicals, to suspend operations.
Only those that produce basic necessities such as medicine, fuel, power, foods, among others, should continue operating at this time.
The news restrictions are posing problems on cargo transportation and logistics.
In the eastern Jiangsu province, a petrochemical warehouse in Jiangyin decided to halt operations for three days from Monday noon.
In Dongguan, truck drivers will need to present virus-negative tests done in the past 24 hours before they are allowed to enter the city for cargo loading/unloading.
“The [petrochemical] markets are already suffering from high crude. These [virus-control] restrictions add pressures,” said a plastics trader.
Although crude has lost some gains, prices continue to hover at above $100/bbl.
Panic-selling ensued across various markets on Monday, including polypropylene (PP), polyethylene and acrylonitrile butadiene styrene (ABS), market sources said.
“Demand is extremely weak. Downstream factories are not buying raw materials because of poor demand for their products,” another trader said.
At the Dalian Commodities Exchange, PE futures slumped by 3.4%, while PP futures plunged 4.4% at the close of trade on Monday.
Focus article by Fanny Zhang
Additional reporting by Lucy Shuai, Yvonne Shi
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