×

China mulls Yangtze river curbs during Congress, pushing up chemical prices

BEIJING, Sept 27 (Reuters) - China is considering restricting traffic carrying some chemicals along the Yangtze River as a security measure ahead of next month's Communist Party Congress, triggering a rally in prices as industrial buyers scramble to secure raw materials.

The Maritime Safety Administration (MSA) said in a statement last week that it may bring in restrictions from Oct. 11 until Oct. 28, but had not yet made a formal decision.

The agency said it had issued an internal document, but gave no further details. Traders said the document outlined possible curbs on the loading and unloading of some potentially hazardous or inflammable chemicals at ports along China's longest river.

The MSA referred queries to the Ministry of Transport, which did not respond to a request for comment.

Traders said they had been informed of the safety crackdown by their logistics suppliers, who had read the internal document as formal instructions for the Congress, which occurs once every five years and will start in Beijing on Oct. 18.

Chinese authorities often crack down on safety ahead of and during the Congress in an effort to prevent incidents that might distract attention from the political gathering.

Ports that could be affected include the world's biggest liquid chemical port, Zhangjiagang, about 100 km (60 miles) from Shanghai, as well as major ports in Jiangyin, Taicang and Changzhou which serve petrochemical companies, said Wood Mackenzie analyst Salmon Lee.

"This has led to ... a spike in spot prices for some products as players rush to bring forward loading/unloading dates, or buy more spot material to cover any possible shortfall," he said in a note.

The rush to deliver cargos may have been exaggerated by the week-long National Day Golden Week holiday from Oct. 1 to Oct. 7 when shipping will slow.

Many buyers have requested suppliers to ship between the end of September and early October, rather than later in October, said Lee.

Spot prices of monoethylene glycol (MEG), used to make polyester and antifreeze, jumped to $950 per tonne this week on a CFR China basis, from $910 to $920 a week ago, Wood Mackenzie said. Benzene prices rose to $835 per tonne on an FOB basis this week, from $800 a week ago, it said.

"Many market participants cannot fathom a de facto month-long pause to the petrochemical business in industrial-rich Jiangsu province and one of the key manufacturing bases in China," said Lee.

(Reporting by Josephine Mason, Meng Meng, Muyu Xu and Stella Qiu; Editing by Richard Pullin)