SINGAPORE (BLOOMBERG) – Demand for face masks and surgical gloves may be surging as China battles the coronavirus, but that’s scant relief for plastics makers as they struggle with absent workers and plunging consumption of other products.
In a sign of how critical the mask shortage is getting, state oil giant PetroChina last week directed overseas employees from Houston to Lagos to buy them up and send as many as two million back to headquarters.
While that’s prompted many of China’s plastics converters – who process raw polymers into everything from plastic spoons to car interiors – to scale up their mask-making operations, it’s not enough to offset plummeting demand for other products, according to SCI99. In addition, some of the producers remain shut due to the extended holidays or can’t make deliveries because of canceled flights and blocked roads, the Chinese industry consultant said.
“The amount of polyester found in each mask is no more than 1-2 grams, mainly in the elastic band,” said Salmon Lee, principal consultant at Wood Mackenzie in Singapore. “This is minuscule when talking about any demand spike, and immaterial in mitigating the economic impact of the epidemic on the polyester chain.”
Manufacturing of face masks accounted for just 0.1 per cent of polypropylene demand in China last year, Horace Chan, an analyst at Bloomberg Intelligence, said in a note. Durable plastics – which are used in automobiles and home appliances, could take the biggest hit from the outbreak, he said.
Polypropylene futures for April settlement have fallen 9.5 per cent since Jan. 21, when markets began taking notice of the coronavirus, according to prices on the Dalian Commodity Exchange. Inventories at state refiners Sinopec and PetroChina jumped by 530,000 tons over the Lunar New Year holidays, more than three times the average increase over the holidays in the last five years, SCI99 said.
As companies like Toyota Motor delay production and China’s massive food delivery network is disrupted, the impact from the virus is spreading across Asia. Weak Chinese demand will compress margins further for South Korean refiners and petrochemical companies, Moody’s Investors Service analyst Sean Hwang said in a Feb. 6 note.
Chinese buyers of polypropylene from the Middle East are trying to re-export it to India and South-east Asia, potentially causing a glut in those markets, said Ashish Chitalia, the head of global polyolefins at Wood Mackenzie in Houston.
“The petrochemical sector was beginning to come back after the easing of trade tariffs,” he said. The coronavirus will extend the low-margin period for petrochemical companies globally, and particularly in east Asia, Chitalia said.
Have a question on the coronavirus outbreak? E-mail us at firstname.lastname@example.org
To get alerts and updates, follow us on Telegram.Source: Read Full Article