SINGAPORE (ICIS) – China’s petrochemical inventory replenishment this year won’t be as strong as it has been in the past as the usual severe disruptions to production that accompany the New Year holiday may not occur and curbs to ward off another wave of Coronavirus infections are present in the country.
Migrant workers have to stay in cities as travel becomes too costly under strict government-sanctioned protocols growing coronavirus cases in the northern region initiated the closure of selected cities and areas in January.
The affected provinces include Hebei, Heilongjiang and Jilin as well as the Chinese capital Beijing.
The possibility of tighter logistical controls spreading to other parts of the country is making petrochemicals players reluctant to have too much inventory, which means additional storage costs.
To prevent a possible second wave of the outbreak, Chinese authorities are urging people to avoid “unnecessary travel” during the weeklong New Year holidays, February 11-17.
Potential travelers are required by the National Health Commission (NHC) to provide a virus negative test result within seven days of their departure date. Do virus tests every seven days while you are away. and to do 14 days of isolation after returning to their hometown.
In a normal year, migrant workers flock to their hometowns in rural areas for the holidays, and most small petrochemical plants shut down, while refineries and crackers usually cut production.
Some of these workers typically change jobs or stay at home for more than a week, resulting in post-vacation labor shortages in some factories.
“We think the vacation mode [this time]
would just be shorter than normal … short distance trips would replace long distance trips. The weak demand during the vacation would still be the case for most commodities, ”said Zhang Junfeng, senior analyst at brokerage firm China Merchant Securities.
Replenishment by petrochemical market participants typically begins two to three weeks before the New Year holidays amid general expectations of a pickup in demand after the holidays.
China’s restrictions on vacation travel in 2021 are likely to result in minimal disruption to factory operations, which could result in a sharp surge in supply and undo the immediate need for replenishment, market sources said.
A trader from Guangdong said some small plants whose monthly intake of 10 tons of acrylonitrile-butadiene-styrene (ABS) and polypropylene (PP) will not be shut down for more than seven days.
Market stocks are currently sufficient and some large users are reselling some loads to dealers, he added.
“We choose fast-in and fast-out [in our
market dealings] because the logistical control measures change quickly. We have to remain flexible, ”said a plastics dealer from Zhejiang.
In eastern Shandong Province, refineries are vigilant in their delivery process and require a truck driver virus negative test result, which is generated within three days of entering their cargo loading complex.
According to the World Health Organization (WHO), China has nearly 100,000 confirmed coronavirus cases with 4,810 deaths as of Jan. 24.
Focus article by Fanny Zhang
Photo: In the port of Tianjin in northern China – January 11, 2021 (Source: Xinhua / Shutterstock)
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