FocusChina's polyolefins demand stays strong in spite of housing curbs

07 May 2010 10:59  [Source: ICIS news]

By Fanny Zhang

GUANGZHOU (ICIS news)--China’s massive infrastructure projects and strong economic expansion will likely keep its demand for polyolefins strong, despite a forced slowdown in the country's housing sector, analysts and industry sources said on Friday.

Polyethylene (PE) and polypropylene (PP) pipes used in the construction sector account for only a fraction of total polyolefin sales, with the bulk going into packaging, automotive and medical segments, they said.

China had been issuing measures to cool down its property sector, which may have strongly benefited from the credit boom in 2009, courtesy of the government’s massive fiscal stimulus.

The authorities had implemented a series of measures to prevent a housing bubble, in line with China’s strategy to curb excessive lending this year.

The measures, deemed necessary after China saw a 25-50% surge in average housing prices in its cities in 2009, included raising the required downpayment for those acquiring second homes to 50% of the total value, from 40%.

“We haven’t seen any effects [on polyolefin demand] from [the] tightening of the housing market, and we don’t see any possibility of future squeeze,” said a source at plastics maker Borouge.

“Polyolefin pipe is a very small part of products, and we would not be affected from a weakening housing market," said an official at Foshan Plastic based in southern China.

China's bouyant economy would be able to absorb the new capacities coming on stream, analysts said. Most economists were projecting the country's economic expansion to accelerate this year from 8.7% recorded in 2009.

“The Chinese economy has been improving continuously, there’s no worry on any decrease of chemical consumptions,” said Liu Qiyuan, chief analyst at Shenzhen-based China Merchants Securities (CMS).

Despite the curbs on the property sector, construction activities in China were unlikely to significantly slow, Liu said.

“The government would adjust its policies to ensure that overall economy wouldn’t be hit much by downturn on commercial housing,” Liu added.

 ($1 = CNY6.83)

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By: Fanny Zhang
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