Loss of export orders threatens Chinese manufacturers

China's trade value declined by 11pc year on year in January-February to $592 trillion, of which the export value dropped by 17.2pc to $292 trillion, showed data from the National Bureau of Statistics.

China's plastics export value dropped by 16pc year on year for January-February to $8.2 trillion.

More trade declines may be expected for March and April, given the rapid spread of the coronavirus beyond China.

A Dongguan-based toy maker with 1,200 workers that supplies Disney shut the plant on 18 March after the cancellation of export orders depleted the company's capital.

Britain's largest fashion retailer Primark decided on 23 March to cancel all orders from suppliers. Its announcement followed the closure of its 376 stores across Europe. Topshop's parent company Arcadia Group has frozen payments to suppliers. Peacocks, a leading British department store, cancelled all orders until 20 June.

China's Ministry of Commerce announced on 26 March that it will postpone the 127th Canton Fair that was originally scheduled for 15 April. Canton Fair, which is also called the China Import and Export Fair, is typically seen as a barometer of China's foreign trade.

While many have already declared bankruptcy, other export-oriented factories in Guangdong and Zhejiang provinces are seeking alternatives such as converting exports to domestic sales.

China on 31 March reported a strong rebound in the country's manufacturing PMI for March to 52, up from a record low of 35.7 in February, with a significant acceleration in the resumption of production. The Ministry of Commerce also said that, by 24 March, about 71.3pc of exported-oriented manufacturers in China had recovered 70pc of production capacity.

But the index of new export orders for businesses was below 50pc, while the backlog index across manufacturers rose by 10.7pc from February to 46.3pc in March.

Inventories of purified terephthalic acid, a key intermediate for chemical fibre polyester used to make clothes, curtains and soft toys, surged to a historic high at 3.1mn t by end of March and its prices shed 25pc month on month to 3,100 yuan/t ex-tank east China on 2 April.

Chemical propylene oxide (PO), a key raw material for making polyether flexible foam, has accelerated its downtrend in the recent week amid concerns about the cancellation of export orders. Spot PO prices slipped to a four-year low at Yn6,800-6,900/t delivered in east China, a fall of 21pc on the month.

The prices of linear low density polyethylene and polypropylene raffia, raw materials for various plastics, have plunged to Yn5,700-6,200/t and Yn6,100-6,300/t ex-tank east China on 2 April, down by 9-14pc from a month earlier.

By Becky Zhang