Oil Price Shockwave Transmission Investigation: Dongguan Plastic City once experienced a rush for goods; after the clamor subsided, the market returned to calm.

Securities Times Reporter Wu Shun

“These days, I’ve been a bit ‘off my main job,’ spending every day tracking price fluctuations and engaging in ineffective negotiations with clients. I’m less focused on production and business,” said Xu Gaofeng, head of Shenzhen Yinhua Technology Co., Ltd., when discussing the recent surge in crude oil prices and the chaos it has caused in downstream raw material markets.

This chaos is most vividly seen at the Dongguan Zhangmutou Plastic City, known as the “barometer” of the national plastics market. In early March, trucks lined up for several kilometers to buy goods here, and merchants’ phones kept ringing nonstop. Prices fluctuated rapidly, and downstream manufacturers, fearing they might not be able to buy supplies, launched a sudden “plastic rush.”

However, a recent on-site visit by the Securities Times found that this frenzy was short-lived. Now, Plastic City has quieted down; warehouses are well-stocked, but few vehicles are coming to pick up goods. Although plastic prices remain high, the market has quietly fallen into a deadlock of “firm quotes but poor sales,” with abundant supply and no real shortages. A short-term panic driven by geopolitical conflicts and emotional factors has ultimately reverted to a rational game based on supply and demand fundamentals.

Traders check the news dozens of times a day

Oil is not only the “blood” of modern industry but also the fundamental raw material for almost all chemical products, including plastics, fibers, and rubber. Since March, the escalation of Middle Eastern geopolitical conflicts has caused international crude oil prices to soar, directly triggering a surge in the plastic raw material market, a core downstream sector of oil.

As the end purchaser of plastic raw materials, Xu Gaofeng is most sensitive to price fluctuations: “The polyethylene I buy was about 6,200 yuan per ton before the Spring Festival. Now, the quote is around 9,800 yuan, an increase of over 50%.” Tan Yunyi, general manager of Dongguan Haiyu Plastic Raw Materials Co., Ltd., who has been in the market for over twenty years, told reporters that a key material he deals with has risen from a low of 7,800 yuan per ton last year to about 13,000 yuan now, an increase of over 5,000 yuan per ton.

Behind the price surge is the heightened nerves of traders. During interviews, several traders’ phones displayed alternating updates of crude oil futures and geopolitical news. “We keep a close eye on every statement from both sides of the conflict. Every wave of rhetoric directly impacts prices. When prices fluctuate, downstream procurement intentions change immediately,” one trader admitted. “Sometimes I check the news dozens of times a day, afraid of missing critical information and making wrong judgments.”

Warehouses are full, but few customers

The rapid price increase coincided almost simultaneously with a “rush for goods.” Tan Yunyi recalled that in early March, major warehouses in Plastic City and surrounding areas were jam-packed, with trucks lined up. “I’ve never seen this in decades; plastics have never been in short supply,” he still finds it incredible.

A staff member from a leading domestic plastic supplier explained that during the Spring Festival, downstream factories were on holiday, but upstream petrochemical plants continued production, often resulting in inventory buildup. After the festival, raw material prices typically decline. Over the past year, plastic prices have been falling steadily, and downstream manufacturers generally hesitated to stockpile, leading to low inventories at the start of the post-holiday restart. “After the Spring Festival, everyone needs to replenish supplies, and with crude oil prices soaring, prices change daily. Downstream companies can only scramble to buy a little.”

However, the “rush for goods” did not last long. On March 24, the reporter saw orderly rows of merchants in Plastic City, but few customers. Only two or three trucks were loading at the warehouse at the city gate. Workers told the reporter, “No more rushing now; there’s plenty of stock, just come and take what you need.” Tan Yunyi revealed that there is basically no shortage of plastics in the market; surrounding warehouses are nearly full.

“High prices, no market” is a common dilemma

In Huangjiang Huannan Plastic City, not far from Zhangmutou, the situation is similar. A trader told reporters that after raw material prices surged, his overall sales volume dropped by 30% to 40%, falling into a typical “high price, no market” deadlock.

“The current pricing system is very unhealthy and not good for both upstream and downstream,” said the trader. “Raw material prices sometimes fluctuate by 700-800 yuan in a single day, making normal stocking impossible. Downstream clients are even more hesitant. We don’t dare to stockpile; we can only wait for inquiries from downstream, ask for the latest price, and if the client accepts, then place an order upstream.”

Xu Gaofeng’s factory currently has raw materials enough for only a week of production. “With current prices, I won’t stockpile; I only meet basic needs. I order as many as downstream orders require,” he said.

This pricing environment also increases the risk of industry chain breaches. Several manufacturers reported that during rapid price increases, some less trustworthy traders would cancel orders for various reasons, such as citing force majeure clauses in contracts to refuse delivery at previously agreed lower prices. “They say the Middle Eastern conflict caused raw material prices to surge, which is force majeure. They even send photos of empty warehouses to clients, and there’s nothing the clients can do,” one manufacturer explained.

Industry outlook remains optimistic

Despite the short-term turbulence, many industry practitioners remain confident about the medium- and long-term market. They believe that the current sharp fluctuations are mainly driven by short-term emotional reactions. “We are watching the Middle East situation, which shows signs of easing. Even in extreme cases, China’s crude oil imports are highly diversified, so there will be no oil shortages, nor a shortage of plastics. China’s energy structure is diverse and highly substitutable, so these high prices won’t last long,” said a downstream manufacturer. “Upstream petrochemical plants are still producing normally, and the supply chain remains stable.”