FocusHazy exports outlook clouds China petchems Q2-Q3 prospects

17 April 2009 07:27  [Source: ICIS news]

By Bohan Loh

SINGAPORE (ICIS news)--Chinese petrochemicals may not be able to ride on the traditional peak manufacturing season starting next month given uncertainty in demand recovery from Western end-consumer markets, industry sources and economists said on Friday.

Buying interests for petrochemicals such as styrenic and plastic resins usually turn brisk after the Labour day holiday on 1 May as manufacturers of consumer electronics, toys and personal computers ramp up production of goods for export between June and September of each year.

But suppliers and buyers within China were keeping a cautious stance as their key European and American markets remained enmeshed with economic and financial difficulties.

China recorded a 20% year-on-year slide in merchandise exports during the first quarter of the year and had also reported it’s slowest ever GDP growth of 6.1% on Thursday.

“We expect second quarter export growth to remain as weak as the first quarter. The decline in export should moderate to 10-15% in the second half of this year,” said Jun Ma, chief economist for greater China in Deutsche Bank.

For methyl methacylate (MMA), demand somewhat rebounded in March and April driven by end-user sectors such as flat screen and liquid crystal display but the sustainability of such recovery remains uncertain, said a Taiwanese producer.

The industrial economies of the west are expected to suffer the brunt of the worst crisis ever to hit the world since the Second World War.

US President Barack Obama had cautioned that this year would prove to remain difficult although some signs of recovery could already be seen in the housing sector.

The UK economy is expected to shrink by 3% this year after falling into a deep recession in the second half of 2008

UK retail sales remained weak, rising 0.6% year-on-year in March “but this is unlikely to be the basis of sustained improvement,” said Stephen Robertson, director general for trade association British Retail Consortium (BRC).

“Customers are still worried about jobs and their own finances - so they’re keeping spending under tight control,” Robertson said.

“We continue to see significant volatility in weekly and individual retailer performance, highlighting the need to remain cautious in drawing conclusions about the prospects for retail spending,” said Helen Dickinson, head of retail at audit and advisory firm KPMG, in a research note.

Some styrenic sellers in China, meanwhile, said they were still hoping for exports demand recovery as inventories of products in the western end-consumer markets have been used up after months of limited buying by major retailers.

($1 = CNY6.83)

With additional reporting by Clive Ong, Chow Bee Lin and Anu Agarwal

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By: Bohan Loh
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