Brazilian pine chemicals exports to China restart

Exports of South American gum rosin and gum turpentine to China have resumed after an extended buying absence of over a year and half.

Brazilian and Argentine exports to China dropped to almost zero from July 2021 because of competitive pricing from Indonesia and high freight rates. But shipping economics have improved markedly this year. Gum turpentine freight rates for 20t isotanks from Brazil to China were down to $1,855 in March, compared with $4,450 in December 2021, according to data from trading firm Enova Service. Meanwhile, freight rates for 20ft containers from Brazil to China have fallen to $750-$1,000 this year from $2,000 in 2021, commercial and trading managers at two pine chemicals companies said.

Lower-priced material and ample supply from Brazil during peak season in the first quarter this year have prompted Chinese buyers to seek South American product, and more volumes should be shipped in the coming weeks and months, according to market participants in Brazil. Argus assessed Brazilian gum rosin at $1,050-1,180/t fob Brazil port in May this year, down by 20-26pc from May 2021 levels, while Brazilian gum turpentine was assessed at $1,800-2,000/t fob Brazil port this month, down from $4,200-4,400/t two years earlier.

One pine chemicals producer said it sold a combined 600t of gum rosin to China in February-April this year, while the chief executive of another producer said his firm sold 500t of gum rosin to China in late February for March shipment. "The buyer was seeking 1,500t, and it probably got the remaining volume elsewhere," he said.

Brazil exported over 2,700t of gum rosin in March, according to government data, a level not seen since December 2020 when Brazil exported over 3,370t of the product to China. Brazil was China's biggest supplier of gum turpentine in the first quarter of 2023, surpassing Indonesia, which was the largest supplier in 2020-22.

Price is right

Market participants say the rebound in Chinese demand for Brazilian product is largely price driven. "If Brazilian prices go up, I don't think the Chinese will be buying more, because they will be stocked [with lower-priced product]," a trading manager said.

Prices for Brazilian pine oleoresin, gum rosin and gum turpentine have been on a downward trend in recent months because of soft demand in Europe and the US amid recession fears, and weaker demand in end-markets, which led to elevated stocks in Brazil during peak season from January through to April.

"There are generalised stocks at forests and factories in Brazil, but an eventual aggressive purchasing behaviour in Asia could clear up inventories very fast," said Ricardo Soares, a pine chemicals consultant and a pine oleoresin producer in Sao Paulo state, Brazil's key producing area.

The new pine oleoresin tapping season has begun in the southern Chinese region of Guangxi and a small quantity of new pine oleoresin was offered to the market in early May. But sources said the sentiment is downbeat as downstream derivatives have seen weaker price trends. Chinese pine oleoresin prices this month are about 23pc lower the same period last year. A slowdown in economic growth, underpinned by a downturn in the country's real estate sector, has made it more difficult for pine oleoresin production workers to shift to other industries.

The Chinese pine chemicals industry is meeting in Fuzhou on 22-23 May to discuss the outlook for the domestic market. A stronger gum rosin market could support increased export volumes for Brazil.

"Brazilian gum rosin prices could increase depending on the development of Chinese demand," an international sales and business development executive said. "I am rather confident at this stage."

Some Brazilian sellers expect an uptick in export volumes by the third quarter of the year compared with the first quarter.

By George Zhou and Leonardo Siqueira

China GT imports