Chinese players: Slow demand, strong cargoes arrival caused storage issues

As reported earlier, demand condition in China remains sluggish this week though most buyers have returned to work after a long Lunar New Year holidays. On the other hand, traders are reporting a good number of cargoes arrivals, causing slight port congestion and heavy storage issues.

In fact, several logistic and warehouse service providers have sent notices to their respective customers to inform about incapability to accept any further consignment due to lack of space. “We have total of 28,000 tons of material, mostly PE, just arrived the main port, and arranging warehouses at the moment is very challenging,” a trader based in Shanghai reported. Similar issues have been reported from domestic producers earlier this week.

Despite high level of inventories amid falling futures prices and slow demand, no suppliers agreed to larger discount to reduce the pressure. Several factors are supporting such decision, including high replenishment costs at the moment and hope for improve demand remain strong. A market source commented, “We think converters are just not ready to make fresh purchases as many need longer time to retrieve normal operating rate after a long holiday. This means trading activities should improve in the near term.”

At the meantime, other traders are looking at another solution – re-exporting their cargoes to nearby Vietnam market for better profit margins. “Vietnamese customers are searching for prompt cargoes, especially homo-PP, and this is an excellent opportunity for us.” However, if domestic demand remains weak into March; traders might need to deploy more effective solution to reduce inventory pressure.