Polymer sellers in China have been extending upto 90 days letters of credit to attract cash-strapped end-users, industry sources said this week.
This was a recent development, a Middle Eastern producer said, adding that "it wasn't as common last week."
Polymer resins are typically sold on "L/C at sight" basis where buyers have to pay upon receiving their cargoes.
With less cash available and lack of orders for finished products, converters are unable to pay for cargoes upfront.
The L/C 90 days deferred payment allows buyers to take the cargoes first, which means sellers can reduce their stocks.
Even some Asian producers, who typically do not do this, have started offering L/C 90 days to Chinese buyers. A Malaysian producer said he was extending this facility to customers in China, but not to those in Southeast Asia, where demand is considered to be higher.
Chinese traders were said to be offering cargoes with L/C 90 days since late last week when buying activity almost ground to a halt on poor market sentiment.
"We do it to sell more material," a Chinese trader said. "It also gives us another $15/mt for the cargoes sold."
Market participants often regard cargoes with L/C 90 days to be at a $15/mt premium compared over cargoes sold on a at sight basis. This is often referred to as the "interest rate."
