China's latest interest rate hike weakens local soap noodle demand

08 July 2011 07:11  [Source: ICIS news]

SINGAPORE (ICIS)--China’s fifth interest rates hike in eight months continues to weaken local demand for soap noodles as downstream producers are facing difficulties in obtaining loans, buyers in China said on Friday.

“The credit tightening is hurting our sales,” a local soap noodle producer said, adding that demand is weak as buyers have no money to make new orders.

The People's Bank of China on Thursday increased the benchmark lending and deposit rates by 25 basis points, taking them to 6.56% and 3.5%, respectively.

Traditionally, demand for soap bars, the finished product of soap noodles, start to peak in the summer months of June to August. However, the credit tightening measures undertaken by the Chinese central bank to cool inflation in the country in recent months has made it diffucult to obtain loans, buyers said.

“Although summer is a peak production season for soap bars, currently we can’t produce anything as it is difficult to get loans,” a local soap noodle buyer said.

Thursday’s interest rate hike comes about a week before June inflation data is made available, local buyers added.

“Prices have fallen as there is no demand. Even so, buyers cannot afford to replenish cargoes [as they have no money to do so],” another third soap noodle producer said.

The prices of standard 80/20 blend soap noodle were assessed as down by yuan (CNY) 700-800/tonne ($108-124/tonne) to CNY8,400-8,800/tonne EXW (ex-works) on Friday as compared with the same period three months ago.

($1 = CNY6.47)

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By: Serena Seng

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