China’s December olefins imports soar; growth to continue in 2011

26 January 2011 08:16  [Source: ICIS news]

SHANGHAI (ICIS)--China’s olefins imports rose year on year in December amid tight domestic supply and the growth is expected to continue in 2011, industry players and analysts said on Wednesday.

“The increase in olefins import in December was closely related to tight domestic supply as two energy giants Sinopec and PetroChina shifted their focus to boost diesel production,” said Yu Chunmei, an analyst from brokerage house Shenyin & Wanguo Securities in Shanghai.

Olefins imports would most likely continue to be strong in 2011 since no big petrochemical complex was scheduled to startup in China this year and domestic consumption was still strong, Yu told ICIS.

Ethylene imports in December jumped 37% year on year to 88,445 tonnes and butadiene imports grew 67% to 38,727 tonnes, according to the data from China Customs.

Naphtha imports soared 22% year on year and 23% month on month to 406,738 tonnes in December, the data showed.

Chinese market players such as Sinopec scrambled for spot naphtha in the last two months of 2010 because of a domestic supply crunch, traders said.

Local refineries ramped up their output of middle distillates at the expense of naphtha and gasoline as frigid temperatures caused a spike in demand for diesel-fired power generators.

“Many polyolefins traders lost huge [amounts of] money in the first half [of 2010] on lower prices, so they imported large volumes of cargoes in the last few months in a bid to make quick money with rising prices,” a trader in Shanghai said in Mandarin.

China imported 248,150 tonnes of linear low density polyethylene (LLDPE) last month, up 16% from a year ago, according to the data.

However, China may see fewer imports in January compared with December as importers were unwilling to build up inventories ahead of the week-long Lunar New Year holiday that starts on 2 February, sources said.

“Naphtha inventories are at a comfortable level [in China] these days. I don’t expect Chinese buyers would repeat what they did for November and December imports,” said a trader from Beijing.

Most Chinese polyolefins stockists and end-users have sufficient inventories because many had refrained from building up stocks during November-December last year due to the economic uncertainty.

The uncertainty was caused by speculations in China late last year about whether the govermnent was going to introduce more credit-tightening policies after it raised interest rates.

Meanwhile, olefins imports in 2010 fell after experiencing a strong 2009 due to the government's fiscal stimulus package at the time.

Ethylene imports fell 16% to 815,405 tonnes in 2010 and propylene imports dipped 2% to 1.5m tonnes, China Customs said.

Dec 2010

Additional reporting by Felicia Loo and Chow Bee Lin

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