Traders say the dollar's surge against global currencies has made imported PP and PE less competitive against domestically sold products across China, Southeast Asia and India. because of increased import costs.

A stronger dollar has pushed up the cost of imported goods for Asian PP and PE buyers. Due to the strong appreciation of the dollar, Asian economies are forced to allow their currencies to weaken, intervene in money markets to soften the slide, or raise interest rates to build up foreign reserves. bad.

Importers are hesitant because of foreign exchange fluctuations

Among the currencies that have been affected by the strong dollar are the Chinese yuan, the Indian rupee and the currencies of Southeast Asian countries.

The yuan has rapidly depreciated by nearly 7% in the past month, showing its biggest monthly drop and hitting its lowest level since September 2020 as China balks at the effects of restrictions. related to Covid. China's foreign exchange reserves also fell the most since late 2016. The Indian rupee has also continuously hit new lows in more than a week. A strong US dollar has sent the Malaysian ringgit down 5.3% year-to-date, while the Thai baht hit a five-year low late last week and the rupiah Indonesia is at the lowest level in the past two years.
“The volatility of foreign exchange rates makes importers hesitant,” said an agent in Southeast Asia of a major Middle Eastern producer. And Southeast Asian exporters are also unable to sell their products because their prices are not competitive because of high costs and buyers are not interested in importing finished products.”

A Thai trader said: “Importers now have a new fear of currency risk. A Vietnamese trader said this has led buyers to prioritize products sold domestically over imported ones. The trader added: “Domestic prices are much cheaper than import prices, so import prices are unlikely to increase at this time.”

The difference between the import price and the domestic price is widening

The impact of a strong dollar comes at a time when Asian PP and PE prices are reeling under the impact of supply easing as a result of competitive quotes from China, Russia and South Korea as well. such as persistently weak demand.

For example, the ChemOrbis Price Tool shows that HDPE film prices have fallen about 8% since the beginning of March and were trading for the week ending May 14 at $1350-1430 per tonne CIF Southeast Asia, and prices LLDPE fell about 4% over the same period. PPH raffia and injection prices also fell about 8% y/y, to USD 1250-1330/ton CIF Southeast Asia.

“The gap between the import market and the domestic market has widened too much due to the depreciation of the yuan against the US currency,” said one large trader in China, adding: “Because Therefore, import demand is too weak and buyers will stay out unless there is an urgent request or a big discount.”

China's domestic market trades below import prices

The ChemOrbis Price Tool shows that China import prices for HDPE film have fallen by about 7% since the beginning of March, to $1150-1190/ton CIF and LLDPE prices down about 5%, to $1,140-1330/ton CIF, while PPH raffia price fell about 3%, down to 1150-1190 USD/ton CIF.

The charts below clearly show that the domestic PP homo and LLDPE markets are trading far below CIF import prices, even with customs duties (if any) and customs clearance. Customs as well as domestic shipping costs are factored into the CIF value to get the actual cost of the imported goods.