China's polyethylene (PE) demand in Q1 was down 1.6%. Now the blog's analysis suggests Jan-May demand was down 4% versus 2010 at 7.1MT.
As the chart shows, based on data from Global Trade Information Services and ICIS:
• Domestic production (blue) was up 5.6% to 4.3MT
• Imports (red) were down 12% at 3MT
• Exports (green) doubled to 240KT
The rise in exports suggests that destocking is still continuing. This is no great surprise after the speculative mania seen on the Dalian futures market over the past 2 years. Many players had bet heavily that crude oil prices would continue rising along with PE prices.
The rise in domestic production is also no surprise. The blog's Sinopec study shows it never cuts production to maintain margins. It acts as a utility, supplying raw materials to the factories to keep people employed.
Thus imports from NAFTA, NEA and Europe took the pain:
• NAFTA and Europe saw net imports halved to 231KT and 71KT
• NEA was down 25% to 589KT
• But the Middle East gained from its strategic relationship (energy for markets) and was up 16% to 1.25MT. Only Iran's supply problems (it was down 16% at 320KT) stopped a bigger rise
• SEA was also up 10% to 550KT, due to the free trade agreement
Volumes will probably remain under pressure as the government battles rising inflation, which could reach 6% this month. And although premier Wen claimed yesterday that "price rises will be firmly under control", he made similar claims last December when it was only 4.6%.
Thus NEA and NAFTA producers are likely to continue to suffer during H2. And product not sold in China, will no doubt be exported somewhere else instead. In turn, this will pressure margins in other regions.