FocusChina DEG users close on pollution woes

21 April 2008 04:59  [Source: ICIS news]

By Hong Chou Hui 

SINGAPORE (ICIS news)--A replay of last year’s pollution problems in eastern China has resulted in the closure of several unsaturated polyester resin (UPR) factories across the country, producers and traders said on Monday.

With new labour laws adding to the pressure, more closures are expected for such plants which utilise diethylene glycol (DEG) as a feedstock, they added.

Two thirds of China’s UPR plants are located in the Wuxi region of eastern China and they were only allowed to resume production in August after being closed for about three months to facilitate a clean up of Lake Tai, which is the source of drinking water for area’s population.

“The blue algae in Lake Tai, which only appears in the warmer months of May and June, has made a comeback according to media reports in China,” a northeast Asian seller of DEG in Mandarin.

“The Beijing Olympics are just around the corner so you can be sure the Chinese authorities will not be caught sitting on their hands regarding this issue,” he said.

He added that UPR factories located within proximity of Lake Tai were highly likely to get their marching orders soon as the Wuxi provincial government had already set out a timetable to close up to 2,150 small chemical plants by the end of 2008.

The remaining one third of UPR plants in the country’s southern province of Guangzhou, have not been spared either.

New labour laws in China relating to healthcare, better working conditions and improved remuneration compulsory kicked into effect from 1 January, resulting in higher labour costs for southern Chinese UPR makers.

The freak winter weather which blanketed parts of China’s in the first two months of 2008 intensified pressure on south China’s UPR producers who had only resumed output after being shutdown on the back of transport woes induced by heavy snow.

“It costs an additional yuan (CNY) 500 ($71.53) per month just to hire a cleaning lady for the factories now. The workers will obviously be demanding a lot more since they have been empowered by the new labour laws. What’s one man’s meat is obviously another man’s poison,” lamented a UPR maker located in Guangzhou in Mandarin.

He added that he was barely breaking even and did not even have the option of exporting his wares due to the yuan’s appreciation to a new high against the dollar in recent weeks.

The US has been a major foreign market for household items made by China’s UPR factories and orders have been falling on the back of an ailing US economy.

The head of the US Federal Reserve, Chairman Ben Bernanke, has said that the country could already be in a recession.

Coupled with the US sub-prime credit crisis which began in the last quarter of 2007 and the loss of 80,000 jobs in March, this could have a negative impact on demand from China’s key export market, industry sources said.

Market analysts tallied US job losses last week at 372,000 for the year so far.

Prices for DEG softened by $20-25/tonne to $1,065-1,080/tonne cost and freight (CFR) China for the week to 18 April from the previous week’s level of $1,090-1,100/tonne, based on global chemical markets intelligence service ICIS pricing.

DEG is used to make household items, antifreeze for car engines and coolant for refrigerators.

Major PET producers in Asia include Saudi Basic Industries Corp (SABIC), Reliance and Nanya.

($1 = CNY6.99)

By: Hong Chou Hui
+65 6780 4359

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