Unravelling China’s polyolefin numbers

By Malini Hariharan

There is some good and not so good news from China. Import and production numbers for January to April are now available and they tell an interesting story.

The good news is that Chinese demand, measured in terms of imports (data from China customs) and local production (data from CBI China), has continued to grow. For the first four months of this year, low-density polyethylene (ldPE) and polypropylene (PP) demand was up 10% at 1.2m and 4.4m tonnes respectively. Linear-low density PE grew even faster at 36% to 1.9m tonnes while high density PE (hdPE) demand expanded by 28% to 2.6m tonnes.

Imports of ldPE were up 35% at 638,000 tonnes, lldPE rose by 19% to 950,000 tonnes while hdPE imports increased 9% to 1.27m tonnes.

However, PP imports dropped 7% to 1.35m tonnes as commissioning of new plants pushed up local production by 20% to around 3m tonnes.

And a closer look at the numbers for lldPE and hdPE reveal that much of the demand growth was captured by local production which grew by over 50% for both the polymers.

The start up of new plants was expected to displace imports and there is evidence that this is quickly happening. The details of imports by country are not yet available but it is likely that Middle East producers have pushed out traditional Asian suppliers.

A South Korean producer I talked to today was not enthused by the China numbers. He admitted that Iranian and other Middle East producers were edging them out from the Chinese PE market.

It is also likely that a good percentage of production and imports during January-April have ended up as inventory and are now being liquidated by traders and even converters.

Meanwhile, the turmoil in Chinese markets shows no signs of easing.

“Buying ideas are very bad; we are waiting for concrete enquiries. Chinese converters are not buying as they are worried that the European crisis will result in a fall in orders for finished goods,” said the producer.

Other markets around Asia are also on the same track. My colleague Prema writes that even a 6% reduction in offers and an assurance of “price protection” has not induced South Asian polyolefin buyers to resume purchases.

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