Asia: Polyester fiber intermediates hurt by tightening up credit score in ChinaPosted by Hoffmann Melendez on January 20th, 2021 China's move to reduce foreign capital inflow by lowering domestic financial institutions' temporary international financial debt allocations has harmed the fiber intermediate market because some traders and also producers are not able to elevate letters of credit scores, market sources claimed Friday. In the past, Chinese polyester makers needed simply to raise one letter of credit scores to cover their resources acquisitions and now need to divide the LC into three or four, said a South Korean purified terephthalic acid maker. "Also significant polyester manufacturers require to break up their LCs," said the PTA manufacturer. "So in some cases we need to delay packing the freights until we obtain all the LCs from different banks." The need to split up the LCs is due to the fact that Chinese banks have actually reduced credit limits, especially for international currencies since April 1, when the brand-new guidelines came into result. " In the past, we can raise letters of credit scores based upon the amount of the offer prior to the money is attributed into our account. Now, it's strictly based upon just how much money we have in our accounts. The credit line is likewise lower," stated a Chinese trader without specifying by how much his credit rating had actually been reduced. Another polyester manufacturer claimed they made use of to be able to purchase 2 or 3 freights of feedstock yet they only have sufficient cash to one now. "In the past, when prices go down, we can acquire even more to stock up and now, even when prices were reduced, we can only manage to purchase on a need-to-use basis," he said. A monoethylene glycol trader agreed. "Concerning one to two weeks back, I had a customer, who is an end-user that had to raise two LCs to buy a freight," he claimed. "I guess the Chinese financial institutions do not have sufficient foreign currency." The effect has been really felt mostly by investors. MEG manufacturers claimed they had not run into consumers having to increase several LCs for a solitary cargo. " We market mainly on agreements, so t here are no issues with LCs," claimed a South Korean MEG manufacturer. An additional MEG producer said: "It's the very first time we are coming across this. We don't see that from our consumers." Sector spectators said the distinction is since PTA traders have a tendency to be hit more by the credit score visual since the PTA area market is a lot more active than MEG. "Polyester makers often tend to be 100% covered by contract for MEG and also around 90% for PTA," stated a Chinese investor.Like it? Share it! More by this author |