China petchems pessimistic pre-Canton Fair

10 October 2008 05:16  [Source: ICIS news]

By Hong Chou Hui

 

SINGAPORE (ICIS news)--Export orders at the biannual 104th China Import and Export Fair, a key barometer of global consumer confidence, are expected to take a beating in the wake of the global financial crisis, petrochemical producers and traders said on Friday.

 

The event, which is also know as the Canton Trade Fair, is China’s biggest and will take place from 15-19 October in Guangzhou, southern China. The last edition of the Canton Trade Fair in April chalked up about $2.28bn (€1.66bn) worth of overseas sales, a reduction of 24.4% from the event in October 2007.

 

A key sector of China's export market, the garment and clothing industry, is bracing itself for a poor showing at the coming trade fair.

 

“The global meltdown is surely going to reduce spending power in the US and Europe. Buyers will tighten their belts and they will be more prudent before purchasing,” said a northeast Asian producer of polyester fibres and yarns (POY) in Mandarin.

 

Echoing this sentiment was a trader of ethylene glycols in northeast Asia who said, “Consumers in the US and Europe would rather feed themselves than dress in the latest fashion because you can’t eat clothes.” 

 

China's clothing production has slowed in line with demand. The Chinese downstream garment and textiles sector recorded fabric transaction volumes of 5.30m metres at the benchmark China Textile City in Shaoxing on Friday. This tepid performance was indeed a far cry from the normal levels of 8-9m metres per day and boom levels of 10-12m metres daily, said industry sources.

 

“Our company’s sales-to-output ratio is now 80% but this is pretty much as good as it gets because there isn’t going to be a lot of demand coming in next week from the US and Europe,” said an eastern China-based seller of POY in Mandarin.

 

She added that a lot of overseas buyers were choosing not to fly to China for the Canton Trade Fair to reduce their costs and were placing their orders via email or phone instead.

 

“Some of the buyers are placing their orders earlier to avoid a sudden upsurge in sentiment and prices after the event but at the rate feedstock prices are falling, they really have nothing to fear,” said the same northeast Asian POY maker.

 

One acrylonitrile butadiene styrene (ABS) trader in Hong Kong who is not planning to attend the event confirmed the expectations and said that orders from the fair should be poor this year due to the US/Europe credit crisis.

 

The global financial markets are still in the throes of a crisis of confidence, with the benchmark Dow Jones index falling by nearly 680 points overnight while Asian bourses started the day in a sea of red. Major stock indices around the world have taken severe beatings over the past month on the back of bad debt triggered by the sub-prime credit crisis in the US which began in October 2007.

 

Job losses in the US doubled month-on-month to 159,000 for September according to statistics from the US Department of Labour’s website, making it the worst period of unemployment to date ever since the financial maelstrom started.

 

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Clive Ong contributed to this story.

 

($1 = €0.73)

By: Hong Chou Hui
+65 6780 4359

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