FocusChina’s home appliance subsidy may not boost PP demand

30 May 2012 10:01  [Source: ICIS news]

By Chow Bee Lin

SINGAPORE (ICIS)--China’s subsidy for energy-efficient home appliances may not boost domestic demand for polypropylene (PP) resin immediately because it applies only to a limited product range, industry sources said on Wednesday.

The Chinese government has earmarked yuan (CNY) 26.5bn ($4.18bn) to subsidise the consumption of energy-efficient household electrical appliances for one year, according to the state-owned Xinhua news agency.

PP resin is a key raw material for components used in home appliances such as washing machines and refrigerators.

PP retail prices in China have edged up this week mainly because local producers have limited sales allocations in their efforts to support prices, and not because the home appliance subsidy boosted market sentiment, local PP resin distributors said.

Locally produced PP injection grade resins were selling at CNY10,550-10,950/tonne ex-warehouse on Wednesday, CNY100-150/tonne higher from last Friday, according to Chemease, an ICIS service in China.

The demand for home appliances and PP resin was unlikely to improve in the short term because only selective types of home appliance will qualify for the energy-efficient subsidy, local appliance manufacturers said.

Any demand improvement will not be immediately felt by the home appliance industry because the sector was holding high inventories, the appliance manufacturers said.

Local home appliance factories were operating at an average of 50-60% capacity because of high inventory and weak demand, they said.

Unconvinced that the demand for home appliance will improve in the short term because of the subsidy, many home appliance makers are still buying PP resin on a hand-to-mouth basis, they added.

The retail sales of China’s top 100 home appliance manufacturers fell by 0.53% in the first quarter, compared with the same period in 2011, according to China’s Ministry of Industry and Information Technology.

Additional reporting by Angie Li, Rain Dong

($1 = CNY6.34)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Chow Bee Lin
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