FocusChina PE/PP capacity expansion to outpace demand growth in '10

22 December 2009 06:07  [Source: ICIS news]

By John Richardson

SINGAPORE (ICIS news)--China’s capacity to produce polyethylene and polypropylene will expand at a double-digit pace next year, while demand growth is expected to ease, said an analyst with CBI, a Shanghai-based commodity information service, on Tuesday.

The country’s polyethylene (PE) capacity would jump by 1.99m tonnes in 2010 to 11.1m tonnes, while its ability to produce polypropylene (PP) would increase by 2.74m tonnes to 12.7m tonnes, based on CBI data.

“This will include not only new capacities due to start next year, but the impact of plants that were commissioned in the second half of 2009,” said Longston Li, who is with CBI polymers team.

“Many of the players in the China market believe there will be great supply pressure in 2010,” he added.

China’s PP output could rise by as much as 2.6m tonnes next year when plants commissioned in the second half of this year were taken into account.

Demand for the polymers would continue to increase in China but the extraordinary growth witnessed this year may not happen again.

This is partly explained by the low base in 2008, when there was a severe weakness in demand and consumption of different grades of PE and PP had either fell or had very minimal growth.

PE demand would rise 7.1% next year to 16.27m tonnes in 2010, while PP demand would grow 12% to 14.55m tonnes next year, moderating from the projected 31.5% surge in demand for PE and 24% jump for PP in 2009, Li said.

Demand growth for polymers this year has been driven by re-stocking on the back of the Chinese government’s massive economic stimulus package.

Meanwhile, the global re-stocking process caused by deep production cutbacks during the economic crisis had ceased, according to market sources.

There were expectations that China’s domestic demand would continue to increase as the government would continue to implement a strong fiscal stimulus package, said Li.

The recovery of exports of finished plastics products since the middle of the year should also bode well for the PE and PP markets, he added.

“But many players are still very concerned about the impact of new plants,” Li said.

With additional reporting by Judith Wang

China’s 2010 PE and PP Start-ups:

Source: CBI

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By: John Richardson
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