Slow China manufacturing hits Asia EPS demand

23 April 2008 08:45  [Source: ICIS news]

SINGAPORE (ICIS news)--Demand for expandable polystyrene (EPS) in Asia has waned in recent weeks in the run-up to the Chinese Labour day holidays in early May, said producers on Wednesday.

The manufacturing sector in China had remained slow since the Lunar New Year holidays in February, resulting in slow consumption of packaging grade EPS.

The credit control policy by the Chinese government to tame inflation coupled with electricity and labour shortages had curbed manufacturing activities, while demand for block flame retardant material was also slow, given that the key construction sector typically enters its peak in the summer months in the middle of the year.

“With the Labour Day holidays approaching, end-users had postponed purchases,” said a Taiwanese producer.

Given the short shelf-life of EPS resins of around three-to-six months, some manufacturers in northeast Asia had reduced operating rates to around 70-80% in a bid to combat mounting stocks.

While most suppliers hoped for a pick-up in demand from the second half of May, some conceded that a significant improvement might emerge only in July.

Given the sedate Asian markets, producers had often depended on exports to move volumes.

"However, these overseas markets are currently also showing tepid interest for Asian EPS," said another Taiwanese producer. Besides, keen competition among Chinese and South Korean material had also resulted in low bids from overseas.

The current weakness in the US housing sector on the back of the subprime crisis and the spill-over effect on the European financial markets had led to slower demand for Asian EPS.

In light of the weak demand in Asia and overseas markets, Asian producers are searching all avenues to maintain sales, an eastern Chinese producer said, adding most producers are facing the twin problem of high feedstock costs and low demand.

Soaring crude numbers had bolstered feedstock styrene monomer (SM) values, but firm SM numbers could not be translated into higher EPS prices as demand was weak.

Major northeast Asian producers include Taiwan’s Loyal Group, Ming Dih Group, Taita Chemical Co and China’s Wuxi Xingda Foam Plastics and Garson Chemicals.

For more on EPS visit ICIS chemical intelligence

By: Clive Ong
+65 6780 4359

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