20 August 2008 05:22 [Source: ICIS news]
By Chow Bee Lin and Nicole Li
SINGAPORE (ICIS news)--Sinopec’s recent move to reduce polyolefins inventories through production cuts in August have failed to raise local market sentiment, as many buyers are not convinced that the cuts will be significant enough to tip the supply balance, local distributors and regional resin producers said on Wednesday.
"Its latest announcement to cut output was received with much scepticism as similar plans for June and July were not implemented," a distributor in east China said in Mandarin.
Also, the planned 10-20% cuts in its August ethylene production were widely seen to have made little difference as the producer’s polyolefins inventories were currently estimated to be two to three times more than the typical levels, local distributors said.
Two Sinopec subsidiary polyolefins companies, namely Qilu Petrochemical and Shanghai Petrochemical had shut down part of their operations, which reduced Sinopec’s total monthly polyolefins output by 5.5% in August, way below the targeted 10%.
"Buyers need time to regain their confidence in the market," a south China trader said.
Sentiment in China, as in other parts of Asia, was also dampened by lower upstream crude values and the global economic slowdown, Asian polyolefins producers said.
The production cuts may been seen to have limited effect in re-establishing the demand-supply balance in China, but some market players said they believed that it helped to stem the price fall in some polyolefin grades last week, and other grades registered a slight price rebound as a result.
"It’s better than doing nothing at all," a northeast Asia PE producer said.
The market was rife with rumours that other Sinopec subsidiaries, namely Maoming Petrochemical, Yanshan Petrochemical, and Zhenhai Refinery and Chemical, also had plans to reduce output in August, but their actual plans could not be confirmed.ICIS chemical intelligence
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