24 December 2012 03:31 [Source: ICIS news]
By Chow Bee Lin
SINGAPORE (ICIS)--China’s polyethylene (PE) and polypropylene (PP) import demand is likely to be slow in the first half of January, but trades may regain pace in end January on restocking activities, industry sources said on Monday.
The demand for PE and PP imports is expected to be weak as importers refrain from building up stocks ahead of the week-long Lunar New Year holiday from 10 February. As such, China’s PE and PP import prices could come under pressure when trades slow down in this period as local producers and traders are holding ample inventories, local sources said.
Chinese PE and PP producers are estimated to have a combined inventory of more than 550,000 tonnes at the end of December, higher compared with the last two years when their total year-end inventory was estimated at 500,000-520,000 tonnes, sources with local producers said.
Many first-tier traders and plastics converters in China were holding low-to-moderate inventories because they had been buying on a hand-to-mouth basis as a result of the uncertain global economic outlook, local traders said.
However, transactions among second and third-tier traders had been active in the recent weeks and that might indicate that these traders had considerable stocks in hand, the local traders said.
First-tier traders refer to companies that buy directly from resin producers and second and third-tier traders refer to companies that buy resins from other traders.
China’s PE and PP trades might regain pace in end January because the local plastics converters will need to restock their inventories for post-holiday consumption, local buyers said.
China’s home appliance application sector typically replenishes their raw material in the first two months of the year, local plastics converters said.
The first-tier traders are expected to start restocking at the end of January if the domestic prices rise above the import prices, local traders said.
The import prices of most PE and PP grades were higher than the domestic prices in late December, according to Chemease, an ICIS service in China.
Even if trades pick up pace in end January, China’s PE and PP import prices might still be capped if a large quantity of Iranian material is available and if downstream demand does not improve, the traders said.
An ample supply of Iranian cargoes has capped the prices of low density PE (LDPE) and high density PE (HDPE) resins for a large part of the year, the traders added.
Demand from China’s downstream plastics processing sector has weakened markedly this year because of the sharp fall in export demand for Chinese finished goods, they said.
China’s plastics product output was estimated at 46.31m tonnes for the January-October period this year, up by 10.2% on a year-on-year basis, according to data from the National Bureau of Statistics of China.
This rate of output growth is significantly lower compared with the 22.01% growth rate registered for the same period in 2011, according to the data.
Additional reporting by Angie Li, Amy Yu, Rain Dong
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