By John Richardson
IT IS always dangerous to assume that the future will be exactly the same as the past - a big lesson from the recent financial crisis.
But so seems to have been the assumption amongst China's polyolefin traders late last year as a close look at import statistics for December and January, supplied to us by the New York-based International Trader magazine, reveal.
In December 2007, for example, 251,600 tonnes of high-density (HDPE) arrived at Chinese ports compared with 292,664 tonnes in December 2009.
January 2010 arrivals totalled 363,129 tonnes against 223,456 tonnes in January 2008 (a "normal" year as there was no economic crisis) and 227,818 tonnes in January 2009.
December 2009 polypropylene (PP) shipments totalled 373,669 tonnes as against 251,179 tonnes in December 2007 (again a more valid comparison than Dec '08 - just about the high-point of the recent crisis, when arrivals were 266,463 tonnes).
"We all thought that credit in China would remain as ample as before, supporting demand and polyolefin pricing," a Shanghai-based trader said today, echoing comments made by a Singapore competitor last week.
Polyolefin pricing has since slipped in Asia (see chart below) because of reduced lending by local banks, labour shortages in Guangdong province and new capacities.
Source of graph: ICIS pricing
"Interestingly, the new restrictions in local credit might actually provide some support for imports over the next few months as the overseas traders can more easily lay their hands on LCs from international banks," said an industry observer.
"But on a net basis imports are still likely to be down this year over 2009 on slower growth in China and new capacities."
Consultancy Nexant ChemSystems wrote in a Q1 review released earlier this week: "At least five new crackers (in China), with a combined capacity totalling more than four million tons per year of ethylene achieved commercial production in the first quarter. Most crackers are integrated with further new derivative capacity on site."