What is the impact of the sea freight price correction on polyethylene imports?

At the beginning of this year, the topic of rising maritime prices has been around our ears. Then, in September, the price of sea freight began to fall. In particular, the sharp correction in the price of sea freight from China to the West Coast of the United States has attracted market attention.

It is understood that the freight of a 40-foot standard container from China to the west coast of the United States fell from about $15,000 to just over $8,000, down nearly half, while the freight shipping to the east coast fell from more than $20,000 to less than $15,000, a drop of more than a quarter.

What factors are causing the retracement of sea freight prices? There are three main reasons for the decline: First, due to the Chinese government's introduction of the policy of dual control of energy consumption in September, factories in some areas have curtailed power, orders from foreign trade enterprises cannot be produced normally, exports have decreased, and shipping demand has decreased. The supply of cabinets is greater than the demand for cabinets. Second, the large number of cabins is also a reason for the price decline. According to the experience of previous years, the export volume before the National Day will increase sharply, because the National Day holiday is relatively long, and many foreign trade enterprises will ship in large quantities before the National Day. Therefore, the ship division will prepare more cabins in advance. In addition, one of the reasons for the high price of shipping is that scalpers have inflated the price because of the lack of containers. As soon as the power ration order came out, the scalper was worried that there was no supply, no one wanted the cabinet, and was eager to get rid of it, so the price dropped sharply.

Can the correction of maritime prices have a certain impact on polyethylene imports?

Xiaobian believes that the decline in maritime prices will definitely lead to an increase in imports. From January to September 2021, the average monthly import volume of polyethylene was about 1.2513 million tons. From January to September 2020, the average monthly import volume of polyethylene was about 1.5284 million tons, and the average monthly import volume fell by 18.13% year-on-year. Only January and March this year did imports exceed the average import volume from January to September last year. What led to a large decline in imports in the 2-3 quarters of this year? First, due to the continuous low domestic polyethylene prices this year, the price of the outer disk is higher than the domestic market price, and the import window has been closed. Another reason is that the price of sea freight continues to rise, resulting in excessive transportation costs. What company would spend more on shipping to sell its products to areas where the price is lower than in their local market? Another factor is that there are more new polyethylene production devices in China this year, and the production capacity release is significant, accounting for the market share of some polyethylene imports.

However, with the correction of maritime prices, its influencing factors will also weaken, and in October-December, polyethylene imports are expected to increase. Considering that because the price of shipping fell in September, there is a certain shipping time difference between the order and the arrival, especially for ships from the United States, and the transportation cycle will be as long as 1 month. As a result, it is expected that there will be a relatively significant increase in polyethylene imports in December. However, subject to the release of new domestic production capacity, it is difficult for the import volume of polyethylene to return to the average monthly level of about 1.5 million tons in the later period. It is estimated that the annual import volume of domestic polyethylene this year will be about 15.1416 million tons, a decrease of 3.3921 million tons compared with 18.5337 million tons last year, a decrease of 18.30%.