16 December 2008 06:19 [Source: ICIS news]
By Pearl Bantillo
SINGAPORE (ICIS news)--Weaker-than-expected economic growth forecasts for China could spell further gloom for the region’s petrochemical industry, market sources said on Tuesday.
The world’s fourth largest economy and Asia’s behemoth appears headed for a hard landing next year as gross domestic product (GDP) growth will slow sharply to around 4-6% from around 9% this year, economists said.
Chinese authorities were gunning for at least 8% growth in 2009 although it remains uncertain whether the announced yuan (CNY) 4,000bn ($583.94bn) fiscal stimulus package would do the trick of perking up its economy.
“That seems a little ambitious now,” said David Cohen, Singapore-based chief economist at consultancy firm Action Economics.
“A 6% growth will still be strong by world standards, but clearly below the trend. It will be the slowest annual growth for a decade,” Cohen said.
The International Monetary Fund (IMF), the global financial stability overseer, expects ?xml:namespace>
“I think GDP (growth) will be even lower at 4% in 2009 despite the government wanting to paint a rosy picture,” said Lin Songli, an economist at brokerage firm Guosen Securities headquartered in Shenzhen.
As major industrial economies are likely to be in the throes of possibly the worst recession in history,
“The most important thing that
But this is a daunting task given that
Official customs showed
Chemical materials production declined 3.3% in November from a year ago, while the chemical fibre sector declined 5.3%, based on data from the National Bureau of Statistics of China.
The slowdown in economic growth will have a direct impact on the consumption of raw materials like petrochemicals, sources said. Estimates of polyethylene (PE) and polypropylene (PP) demand are usually based on economic growth forecasts for the year.
“If the government single-mindedly pursues the domestic growth agenda, it could push up GDP growth to 7%, which would help PE and PP demand growth,” said the source from a large Indian petrochemicals supplier. The economic boost may just kick in sometime in the second or third quarter of next year, he added, with regards to the domestic stimulus package.
“But it is too early to say how extensive the impact of the stimulus package will be even in Q2 and Q3. We have to wait and watch,” said the supplier.
“I assumed the market will not rebound until the second quarter of next year as the current time is the toughest time. It’s the best prediction,” added a Tianjin-based melamine producer.
The infrastructure and retail sectors in
“Demand for our end-products such as apparel and socks and neckties has been terrible this year, so I think that would become worse next year and affect prices of our own [polyester] products,” said the general manager of Jiangsu-based Heng Li Polyester, a major producer of polyester filament yarns in eastern China.
“The exports will continue to drop amid a shrinking demand from overseas and the consumption demand also will not rebound in a short period amid the economic crisis,” said Lin of Guosen Securities.
A Singapore-based base oils blender allowed for a bit more optimism despite the poor market conditions in December and January in
“This state of depressed demand is an overcorrection and can’t last for too long. Some demand should return after the Chinese New Year holidays,’’ he said.
Bohan Loh, Judith Wang, Anu Agarwal, Prema Viswanathan and Salmon Lee contributed to this story
($1 = CNY 6.85)
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