China PP to remain firm despite Mid-East supply

06 March 2008 17:55  [Source: ICIS news]

XIAOSHAN (ICIS news)--China’s polypropylene (PP) market will remain firm this year although competition is likely to heat up as new plants in the Middle East come on stream in the second half, said a Shanghai SECCO Petrochemical executive on Thursday.

“Any new plant start up will create an oversupply in the short term because demand growth is gradual, but the new supply would eventually be absorbed by the market,” said SECCO’s polyolefins general manager, Shen Ming, in Mandarin, adding that he believed this year would not be that bleak for suppliers.

Shen estimated that prices of locally produced yarn grade PP would hover at an average of yuan (CNY) 11,700/tonne ($1,647/tonne) this year, and that prices were unlikely to go lower as producers were faced with soaring production costs due to record high crude values.

“Prices could soften only if crude prices fall back to $80/bbl, [otherwise] I expect yarn grade prices to be quite stable this year,” he said, noting that prices had fluctuated within a CNY1,000/tonne range last year.

Shen said there was strong impetus for China PP demand to grow as PP is increasingly used as a substitute for other resins such as polystyrene (PP) and polyethylene terephthalate (PET), as well as steel in some applications.

China’s recent ban on the production of plastic bags thinner than 0.025mm was also expected to boost demand for PP non-woven bags, and hence PP consumption, he said.

A flurry of new PP plants are scheduled to come on stream in the Middle East this year and if all these new lines are started up as planned, a total capacity of about 2.7m tonnes would be added, according to industry sources.

SECCO is a joint venture of Sinopec, Shanghai Petrochemical and BP.

($1 = CNY7.10)

For more on PP visit ICIS chemical intelligence

By: Chow Bee Lin
+65 6780 4359

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly