APIC '12: Iran PE exports weigh on weak China market - Nexant

18 May 2012 02:19  [Source: ICIS news]

KUALA LUMPUR (ICIS)--Increasing polyethylene (PE) exports from Iran are weighing on an already weak China market, one consultant said on Friday.

"Exports from Iran, particularly of LDPE [low density PE] and HDPE [high density PE] to China have risen in the last few weeks, pressuring prices," said Mazlan Razak, senior consultant at Nexant, on the sidelines of the Asia Petrochemical Industry Conference (APIC).

"While the volumes are marginal in the context of overall Middle East PE exports to China, the fundamental issue is weak demand in China," he added.

Lacklustre demand in China is magnifying the impact of these additional volumes, the consultant noted.

Widening sanctions against Iran are pressuring ethylene exports, resulting in higher PE production, said Razak.

As of yet, there are no signs of an emerging demand recovery in China. Concerns about economic weakness in Europe and how China adjusts to reduced exports to the region are weighing on sentiment, he said.

"The first sign of a recovery would be in the form of [plastic] converters coming back into the market, but this is not happening. There is not much of a spread between [feedstock] naphtha and PE at the moment," Razak said.

The struggles of converters, most of which are small to mid-size enterprises (SMEs), are illustrated in the China Manufacturing Purchasing Managers Index (PMI) compiled by global investment bank HSBC, he pointed out.

This index, which reflects the activity of SMEs rather than larger companies, has been on an overall downtrend in the past several months.

The China Manufacturing PMI in April rose to 49.3 from 48.3 in March, but still indicated a decline in activity. Any reading above 50 indicates expansion while under 50 indicates contraction.

The figures are in stark contrast to the China Manufacturing PMI released by the China Federation of Logistics and Purchasing (CFLP), where the April PMI rose to 53.3 - up for 5 consecutive months.

By: Joseph Chang

Additional reporting by John Richardson in Kuala Lumpur

By: Joseph Chang
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