China’s PP imports to fall in H2 as domestic capacities rise

17 July 2009 12:41  [Source: ICIS news]

By Judith Wang

SHANGHAI (ICIS news)--China’s polypropylene (PP) imports will fall in the second half mainly due to new domestic capacities and decreasing arrivals of arbitrage cargoes after high imports in the first half of 2009, industry sources said on Friday.

“Many companies have concluded their restocking efforts in the first half of the year after a destocking in the fourth quarter of last year. And at the same time, domestic new capacities will also start up and the demand will not likely show a sharp growth in the second half,” Li Jia, a market representative from India’s Reliance Industries said.

“These factors will probably lead to a decline in PP imports,” Li said at a discussion panel on the 2009 Polypropylene Industry Chain Forum.

China's new PP capacities in the second half of this year were expected to total 800,000 tonnes, mainly from Fujian Refining and Petrochemical (FREP), Dushanzi Petrochemical, Tianjin Petrochemical and Panjin Ethylene, according to the estimates of a product manager with Sinopec’s chemical sales branch.

“Many low-priced import cargoes flowed to China in the first half of this year, making the PP import cargoes rise sharply. But it’s unlikely that the arbitrage window will open in the second half with new increasing domestic supply weighing down prices ,” Zhu Qingqing, sales representative from Zhejiang Grand Imp. & Exp. Co said on the sidelines of the forum.

However, China should not be worried too much about the imports arrivals to China, Lin Hanfu, a consultant from Formosa Polypropylene (Ningbo) Co said.

“Import cargoes from the US will seldom arrive to China in the future as their PP cargoes will mainly focus on local market due to decreasing PP capacities,” Lin said.

“The US closed around 1m tonnes of PP capacities last year due to the economic crisis and it will continue to close around 240,000 tonnes of PP capacities this year, gradually achieving a balance between supply and demand,” Lin told ICIS news.

Total PP capacities in the US in 2008 were around 8.9m tonnes while the demand was around 6m tonnes, Lin said.

Production of new plants in India and the Middle East will not be stable at the beginning therefore their future cargoes to China will not be very much, Lin said.

Domestic downstream plants remained cautious at building up stocks this year. They were currently trying to keep a rational inventory level after experiencing a roller-coaster year in 2008, sources said.

China imported around 1.55m tonnes of PP in the first five months of this year, according to data from China Customs.

The Polypropylene Industry Chain Forum runs from 16-17 July.

For more on polypropylene visit ICIS chemical intelligence
See John Richardson’s Asian Chemical Connections Blog
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By: Judith Wang
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