Here’s the monthly update from Sofeast’s sourcing team who has been tracking the costs of commonly used raw materials from China for the past year to help you understand where the market is right now. If you or your supplier are purchasing materials from China for your products the cost changes that you see here do have an impact on your bottom line!
Here’s the up-to-date material cost data from China for you as of late September 2023 and the price evolution over the past twelve months:
The graph below shows the cost fluctuation for the past year with the maximum, minimum, and averages for each of the materials.
Here is what our market analysts attribute these changes to during this past month:
Epoxy resin (epoxy refers to E-51) – cost increased 4.27%
Resin Cost Support Weakens as Producers Focus on Early Orders
The raw material bisphenol A dropped slightly, and the other raw material epichlorohydrin flat-lined, which weakened the resin cost support. Resin production enterprises are mainly delivering early orders, and the start-up load of most devices is stable. The overall start-up load of the industry is narrow, indicating that production is relatively low.
On the downstream side, most of the pre-holiday (Chinese Mid-Autumn Holiday) stock has been consumed, and buyers are paying less attention to the market. There is less intention to continue replenishing inventory, and the overall market trading atmosphere is light.
ABS (AG-15E1) – cost increased 3.29%
Key Factors Affecting Current Market Price Change
- Cost: The price of styrene, a key upstream raw material, has been falling, which has put downward pressure on the price of the finished product.
- Supply: The availability of physical supply has increased, making it difficult for suppliers to raise prices.
- Demand: Short-term downstream replenishment is limited, which is also contributing to the downward pressure on prices.
In other words, the current market price is being affected by a combination of factors: falling costs, rising supply, and weak demand. This has created a situation where suppliers are struggling to raise prices, even in the face of rising costs.
Silicone (110) – cost increased 7.82%
Domestic 110 Raw Rubber Market Prices Recover, But Downstream Demand Weakens
Domestic 110 raw rubber market prices rose after recovering from a recent decline. However, this week, the downstream rubber market demand has not improved significantly. As a result, the raw rubber market is struggling to improve.
Downstream terminal buyers have completed their staged replenishment over the past two weeks and are now less willing to take goods. This has weakened the raw rubber trading atmosphere this week.
However, some manufacturers have started to buy low due to the continued inverted situation between raw rubber and cost. This is supporting the stable operation of raw rubber prices.
Zinc alloy (Zamak5) – cost increased 5.87%
Reasons for Zinc Price Increase
The following factors have contributed to the recent increase in zinc prices:
- Improved market sentiment: A number of government measures to promote consumption have been implemented, and overall market sentiment has improved.
- Reduced supply: Smelter maintenance and extended maintenance at some manufacturing plants have reduced zinc output, leading to a shortage of stock in the spot market.
- Increased demand: The post-holiday period is traditionally a peak consumption season for zinc, and terminal projects are starting up or being planned, which is expected to further boost demand.
As a result of these factors, zinc prices are expected to remain high in the near future.
AL alloy (ADC 12) – cost increased 5.06%
Factors Supporting Aluminum Price Increase
Two main factors are supporting the recent increase in aluminum prices:
- Positive market sentiment: The continuous introduction of domestic policies to expand domestic demand has boosted market sentiment. This has led to positive trading sentiment in the futures market, which has pushed up futures prices and driven spot prices to refresh the year’s high.
- Rising costs and strong demand: Domestic alumina prices continue to rise, increasing production costs. At the same time, market demand is expected to continue to be supported by policy support. This combination of factors is providing strong support for spot prices, which are continuing to move upward.
PVC (SG-3) – cost increased 1.01%
Factors Affecting PVC Market Direction
On the one hand, PVC production is increasing as more enterprises resume operations after maintenance. On the other hand, export orders are weak and terminal demand remains weak. However, the large volume of export orders that need to be delivered is limiting the decline in inventory in East China and South China to some extent.
The hawkish statement by the Federal Reserve in the second half of the year is also putting pressure on commodity markets, including the PVC market.
Paper for color box (157G) – cost increased 8.33%
The following factors are affecting the current paper price trend:
- Increased demand: Printing factories in East China, Central China, and South China have released orders this month, and terminal demand has increased. This has led to moderate stock levels at printing factories.
- High pulp prices: Upstream pulp prices are running at a high level, which is providing positive support for paper prices.
- Limited supply: Paper mills are actively promoting growth, and some specifications and models of paper are in short supply. This is conducive to the implementation of price increases.
- Reluctance to sell: Dealers are reluctant to sell paper at low prices, and many are raising prices.
Overall, these factors are supporting a rising paper price trend.
Paper for cartons (AA 120G) – cost increased 7.33%
Factors Supporting Paper Price Trend
The current paper price trend is being supported by the following factors:
- Raised ex-factory prices: Several large-scale paper mills have raised their ex-factory prices, which has boosted the overall market sentiment. This has led to better production and sales conditions, and the focus of transactions has moved upwards.
- Strong terminal demand: Terminal orders are being followed up smoothly, and downstream packaging plants are more active in replenishment. This is helping to reduce upstream paper mill inventory and supporting higher paper prices.
- Rising waste paper prices: The average price of waste yellow board paper has risen, but the cost price of corrugated paper has risen less. This has improved industry profits and supported higher paper prices.
Overall, these factors are creating a bullish environment for paper prices.
Stainless steel (304/2B 0.04mm) – cost decreased 0.85%
Market Trends Driven by Declining Profits and Demand Concerns
The decline in finished materials prices has squeezed profits and weakened the enthusiasm of enterprises to produce. This has led to increased demand concerns. Additionally, the decline in leading steel mill inquiry prices has put further downward pressure on market prices.
Battery (Lithium cobalt oxides) – cost decreased 16.90%
Lithium Iron Phosphate Prices Fall on Lower Raw Material Costs and Weaker Demand
Lithium iron phosphate prices fell sharply this month due to a combination of factors, including:
- Lower raw material costs: Upstream lithium carbonate prices continued to fall rapidly this month, dragging down the cost of lithium iron phosphate production.
- Weaker demand: Downstream energy storage and power battery companies placed fewer orders this month than expected, leading to a slowdown in lithium iron phosphate consumption. This put further downward pressure on lithium iron phosphate prices.
Overall, the combination of lower raw material costs and weaker demand has led to a significant decline in lithium-iron phosphate prices this month.
How to combat the rising costs?
Explore cost-reducing tips in this post: Rising Raw Material Prices: What Strategy To Follow? (6 Approaches).
What to do if your Chinese supplier suddenly tells you that material costs have risen: How To Cooperate With Your Chinese Supplier, Part 16: Bad News from China, Raw Material Prices Just Increased!
If your supplier just isn’t working out, maybe sourcing a new supplier will help you find one who can offer you better prices and more. If so, there’s no need to fear switching from your current supplier to a new one if you’re prepared: How To Switch To A Newer, Better Chinese Manufacturer? [eBook].
We hope this is helpful. Our mission at Sofeast is to help importers have transparency in their supply chain and to give them more control. And this information is critical to have some visibility into your manufacturer’s costing.
By the way, you can always contact us if you have any questions about whether a manufacturer’s quote is reasonable.
Leave a Reply