FocusUncertainty clouds China's polymer market prospects

18 May 2009 06:00  [Source: ICIS news]

By Chow Bee Lin and Ng Hun Wei

GUANGZHOU (ICIS news)--The near-term future looks uncertain for China’s polymer market with the likelihood of markedly reduced demand amid the expected surge in polyolefins capacity in China and the Middle East, and the threat of rising regional trade barriers, industry sources said on Monday.

“Demand has held up quite well so far despite the global downturn, but we are not sure what will happen in the second half of this year,” a South Korean polyolefins producer said on the sidelines of four-day plastics raw material and machinery exhibition Chinaplas 2009.

The producer said he believed polymer demand had been supported by the home appliance subsidy recently introduced by the government to boost consumption in rural communities.

But many other industry players remained confident that due to the government stimulus packages introduced last year, the China market would continue to drive global plastics demand.

“Everyone is pretty optimistic about the demand that will be generated by the Chinese government’s massive stimulus package. Every producer will be looking to grab a slice of that pie,” a plastics trader said.

How the industry will respond to the Chinaplas exhibition would be a good gauge of market sentiment, said a second resin producer. China's economy, along with its polymer industry, has been battered by the global recession but could possibly be seeing initial signs of recovery.

“The economic conditions are still very difficult but hopefully the response will be encouraging enough to give us confidence for the second half of the year,” said the plastics producer. Chinaplas started in Guangzhou on Monday.

China’s polyethylene (PE), polypropylene (PP), polystyrene (PS) and acrylonitrile-butadiene-styrene (ABS) and polyvinyl chloride (PVC) consumption was forecast to rise 0.7% year-on-year to 11.6m tonnes, 2.1% to 10.3m tonnes, 0.2% to 3.7m tonnes, 1.6% to 3.4m tonnes and 2.2% to 9.5m tonnes this year, respectively, according to the China Plastics Processing Industry Association (CPPIA).

Asian polyolefins buyers and sellers were also watching what impact the new capacities in China and the Middle East might have on regional prices.

About 4m tonnes/year and over 7m tonnes/year of new polyolefins capacities are expected to be added in China and the Middle East, respectively, by the end of this year if all the new plants start up as planned, industry sources said.

Meanwhile, South Korean producers were concerned about what implications might arise from Chinese producers’ anti-dumping complaints lodged against South Korean polyolefins exports to China.

“There were no further discussions between the two sides after a South Korean delegation met the Chinese producers recently. We’re not sure if this is a good or bad sign,” a second South Korean polyolefins producer said.

Attendance at Chinaplas could be affected by ongoing concerns about a possible flu pandemic, as some foreign exhibitors were only sending their local representatives to the event this year, industry sources said.

For more on PE, PP, PS, ABS, PVC visit ICIS chemical intelligence
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By: Chow Bee Lin
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