China’s polypropylene (PP) imports from South Korea are likely to fall in the near term amid diplomatic tensions between the two countries, industry sources said.
More stringent customs inspections of goods from South Korea are being conducted in China, and Chinese importers are also having difficulty securing letters of credits (LCs) for the purchases, a South Korean supplier said.
Most traders and downstream PP users in China have been reluctant to order spot PP cargoes from major South Korean supplier Lotte Chemical, although contractual volumes from the producer are being delivered without hiccups, according to industry sources.
Lotte Chemical is a subsidiary of the South Korean conglomerate Lotte Group, which is facing the ire of the Chinese for providing the land on which the controversial US’ anti-missile defense system against North Korea is being installed.
Diplomatic tensions between China and South Korea arose this month following the latter’s decision to allow the deployment of the US’ Terminal High Altitude Area Defense (THAAD) against missile threats from North Korea.
China highly opposed the move, concerned that the system threatens its own security given its proximity to North Korea.
This month, South Korean companies with operations in China were allegedly subjected to cyber attacks, store closures and fines, while China’s state-controlled media has called for a boycott of South Korean goods and services, according to media reports.
A high-ranking South Korean politician warned that it may file a complaint against China to the World Trade Organisation (WTO) on what is deemed as economic retaliation from the world’s second-biggest economy over the THAAD installation.
China is a major export market for South Korean products.
For PP, South Korean material accounted for about a quarter of China’s total 4.56m tonnes imports.
Meanwhile, China’s appetite for PP imports may also be waning amid slumping prices in the domestic market.
On 10 March, prices of flat yarn PP in east China were assessed at yuan (CNY) 8,425/tonne, down by about 8% from three months ago, ICIS China data showed.
The falling prices were mainly a result of the inventory pile-up during the Lunar New Year holiday (27 January-2 February).
China had around 1m tonnes of PP in stock in the week ended 10 March, versus 600,000 tonnes before the holiday.
Year | PP Grade | Total (in thousand tonnes) | Imports from South Korea (in thousand tonnes) | Share of South Korean cargoes |
2014 | PP homopolymer | 3,630 | 870 | 24.0% |
PP copolymer | 1,400 | 310 | 22.0% | |
Total | 5,030 | 1,180 | 23.5% | |
2015 | PP homopolymer | 3,400 | 850 | 25.0% |
PP copolymer | 1,480 | 280 | 19.0% | |
Total | 4,880 | 1,130 | 23.2% | |
2016 | PP homopolymer | 3,010 | 830 | 27.0% |
PP copolymer | 1,550 | 290 | 19.0% | |
Total | 4,560 | 1,120 | 24.5% |