FocusAsia plastics brace for global downturn
14 October 2008 09:58 [Source: ICIS news]
SINGAPORE (ICIS news)--The plastics industries in China and southeast Asia have begun feeling the impact of the global economic downturn, with downstream demand expected to slow down markedly over the next few months, Asian plastics processors said.
Malaysia’s plastics processing industry was bracing for tougher times ahead, with some plastics manufacturers expecting demand to fall in the next three to four months.
“Demand from the electronics and electrical sectors is expected to fall by 30-40% in the next 3-4 months,” a plastics processor in Kuala Lumpur said.
“Most of our overseas customers have placed their orders till the end of the year, but some customers in the electric and electronics sector have held back their orders for the fourth quarter, due to uncertainties in the global economic situation,” a second plastics processor in Kuala Lumpur said.
Over in Indonesia, one plastics processor said some local banks had tightened their credit facilities because of the global financial crisis.
“If you have drawn down a $10m credit facility to $5m, for example, the bank may not let you take more credit,” he said.
A second plastics processor in Indonesia said one of its customers in the US had requested that one shipment be postponed due to its failure to open a letter of credit in time.
“We agreed to postpone the shipment because we understand our customers are going through a difficult time now,” the second Indonesian plastics processor said.
In south China, some local converters said they had turned down some export orders because it only accepted advance payment, but the prospective customers could only pay on credit.
“We are very careful now because you’ll never know who is the next Lehman Brothers,” one converter in south China said.
Lehman Brothers’ collapse in September triggered a major shake-up in the US financial system and prompted a string of massive government-led bailouts, which made Asian banks queasy about lending, analysts said.
Some plastic garbage bag manufacturers in north China said some of their export orders were cancelled after the global financial crisis unfolded.
The only consolation in the today’s battered economy was that raw material prices had fallen, the Asian plastics processors said.
“It may be harder to obtain credit now, but we can buy more with less money,” the first Indonesian plastics processor said.
Given the lower raw material prices and the anticipated start-up of new resin capacities in the Middle East next year, it is easier to convince bankers that the plastics manufacturing sector has a brighter prospect and the plastics manufacturers have a better ability to service debt, the first Malaysian plastics processor said.
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