The market is once again “full of excitement”, with PP and PE becoming popular across the board
The recent market situation is “crazy”! The “market whirlwind” brought about by the conflict between Russia and Ukraine is still blowing violently, pushing oil prices to the sky, and the downstream market is also following along with “the music continues, and the dance continues”!
Affected by the tense geopolitical situation, international oil prices continued to rise, reaching the $110 mark. As of press time, Brent crude oil rose 2.31% to US$113.01 per barrel. WTI crude oil rose 2.74% to US$110.62 per barrel, both holding steady at the 110 mark.
Today, the domestic energy and chemical futures market continues to be hot, with Shanghai crude oil rising 3.42% to 710.3 yuan/barrel, maintaining a strong high level. Fuel oil, diethanol, methanol, and soda ash increased by more than 1%; styrene and low-sulfur fuel increased by more than 0.5%; PP and PVC maintained their upward trend without falling in price.
Perhaps even crazier than that, some institutional commentators said that with reference to the previous two similar sanctions against Iran, global energy prices may be impacted again, and crude oil prices may once again exceed the $140 mark, exacerbating global inflationary pressure.
my country is also the largest importer of textile and apparel products from Russia and Ukraine. If the situation in Russia and Ukraine worsens further, it will have an increased impact on the economic and trade activities of my country’s textile export enterprises with Russia, Ukraine and even the world. In this regard, the editor has collected tips and suggestions from relevant credit insurance companies on the potential risks brought about by the Russia-Ukraine conflict:
01
Pay attention to financial market fluctuation risks
As the latest sanctions against Russia, Western countries, led by the United States and the European Union, issued a joint statement announcing a ban on several major Russian banks, including Sber Bank and VTB Bank, from using the Society for Worldwide Interbank Financial Telecommunication (SWIFT) international settlement system. The sanctions, if implemented, would mean temporarily cutting off most trade and financial flows between Russia and the world. Extreme panic and risk aversion have spread, capital outflows from emerging markets and pressure on exchange rate depreciation have increased sharply. On the 28th, the Central Bank of Russia announced that it would raise the benchmark interest rate to 20%. A series of financial market fluctuations will directly affect importers’ willingness and ability to pay.
02
Pay attention to the logistics risks of shipping suspension
The war has affected shipping services and intensified international shipping tensions. Currently, the Black Sea and Azov Sea waters of Ukraine and Russia have been added to the high-risk areas. The ports in these waters are the main export hubs for transactions. Once they face a blockade, they will be significant impact on trade. Under letter of credit transactions, documents may not be sent to the bank and cannot be negotiated. Telephone release of bills of lading under non-certificate payment methods will further lead to the rejection of the goods, making it difficult to return or resell the goods after entering customs, and increasing the risk of the buyer abandoning the goods. .
03
Pay attention to the risk of rising costs of some raw materials
Faced with the obvious deterioration of the situation between Russia and Ukraine and the expansion and escalation of Western countries’ sanctions against Russia, the global market reacted violently, with significant risk aversion, and the prices of gold, oil, natural gas, agricultural products, etc. rose. In view of Russia’s share of non-ferrous metals such as aluminum and nickel, once Russian aluminum and nickel companies are sanctioned, the risk of global aluminum and nickel supply will increase. At the same time, among more than 130 key basic chemical materials, 32% of the varieties in my country are still blank, and 52% of the varieties still rely on imports. Such as high-end electronic chemicals, high-end functional materials, high-end polyolefins, aromatics, chemical fibers, etc., and most of the above products and industry chain segmented raw materials belong to basic bulk chemical raw materials. my country’s more than 30 kinds of chemicals are mainly imported from abroad, and some are highly dependent on high-end monopoly products such as adiponitrile, hexamethylenediamine, high-end titanium dioxide, and organic silicon. Since the beginning of the year, the price trend of these products has gradually soared, with a maximum increase of 8,200 yuan/ton, an increase of nearly 30%. For the textile industry, the indirect impact of the increase in raw material costs and logistics costs caused by the Russia-Ukraine conflict deserves attention.
04
Relevant suggestions for dealing with risks
1. Pay close attention to changes in the situation and suspend new business operations in Uzbekistan.
The impact of the Russia-Ukraine conflict may lead to an increase in a series of business risks, such as rejection of goods, buyer’s default in payment, and buyer’s bankruptcy. At the same time, given that the situation in Ukraine is still unclear in the short term, it is recommended that export companies suspend new business in Ukraine and pay close attention to the follow-up of the situation in Ukraine.
2. Comprehensively sort out the orders in hand and project execution progress of Russian-Ukrainian buyers
It is recommended that export enterprises comprehensively sort out the orders and project execution progress of Russian-Ukrainian buyers, pay real-time attention to the risk status of partners, maintain adequate communication, and timely review contract terms such as shipment time, delivery location, payment currency and method, and force majeure. Make adjustments and do a good job in risk prevention.
3. Appropriately evaluate the layout of raw material procurement volume in advance
Considering that there is a high possibility that the situation between Russia and Ukraine will escalate, which may lead to price fluctuations in the market of some raw materials, it is recommended that companies evaluate the extent of the impact, prepare for price fluctuations in advance, and make raw material arrangements in advance.
4. Apply cross-border RMB settlement
In view of the current situation of sanctions against Russia in the international market, future transactions with Russian buyers will be directly affected. It is recommended that export companies adopt cross-border measures for Russian business.RMB settlement method.
5. Pay attention to the collection of payment
It is recommended that export enterprises pay close attention to the progress of the situation, do a good job in collecting payment, and at the same time use export credit insurance as a policy financial tool to avoid political risks and commercial risks and ensure the safety of export foreign exchange collection.
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