FocusChina’s PE, PP import prices may move sideways in Q4

29 August 2012 07:59  [Source: ICIS news]

By Chow Bee Lin

SINGAPORE (ICIS)--China’s polyethylene (PE) and polypropylene (PP) import prices are likely to fluctuate in a tight range in the fourth quarter amid marginal demand increase and substantive new capacity addition in the country, industry sources said on Wednesday.

On the flip side, prices are unlikely to fall markedly because the downward pressure could be off-set by high crude values, they added.

US crude futures have been on a gradual uptrend since the start of July, with prices increasing from about $83/bbl on 2 July to $95.47 at the close of trade on 27 August.

China is scheduled to add 1.09m tonnes of PP capacity and 1.35m tonnes of PE capacity in the second half of this year, consisting mainly of high density PE (HDPE) and linear low density PE (LLDPE), industry sources said.

The new PE and PP capacities will account for 11.3% and 7.1% of China’s total PE and PP capacity, ICIS-Chemease data shows.

China’s total PE and PP capacities are estimated to hit 11.95m tonnes/year and 15.27m tonnes/year after the new plants come on stream, the data shows.

Downstream demand might improve in October because plastics processors could raise production rates in the run-up to the year-end peak consumption season, market sources said.

However, in view of the slower economic growth projected for China and the global economy, any demand recovery was likely to be marginal, said a source at a Chinese home appliance manufacturer.

Restocking activity is also expected to be limited in the fourth quarter as most plastics processors and stockists have been keeping low stocks this year because of the uncertain global economic outlook, China-based traders said.

China’s plastic resin demand is expected to improve significantly only if new economic stimulus measures are introduced on a global scale, said a source at PetroChina.

China’s interest rate cuts since late last year aimed at boosting domestic consumption have failed to lift  plastics resin demand significantly because the Chinese plastics processing sector still derives much of its revenue from European and US markets.

But demand in both the regions has been dwindling.

According to a survey by the Pew Research Center (PRC) issued this month the US middle class has less confidence in the nation’s economy and on their own future leading to a slower consumption pattern.

The recent hikes in China’s PP and PE import prices does not reflect strengthening market fundamentals because it is mainly driven by high energy and feedstock prices instead of strong demand, said a source at a Taiwanese resin producer.

China’s benchmark LLDPE and PP flat yarn import prices had risen by 2-4% over the four weeks ended 24 August to $1,280-1,320/tonne CFR (cost and freight) China, and $1,370-1,400/tonne CFR China, according to ICIS.

Additional reporting by Amy Yu, Angie Li, Rain Dong, Lizzie Yu, Doreen Zhao

($1 = €0.80)

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

By: Chow Bee Lin
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