China’s slowdown continues

China PE Dec11a.pngToday’s purchasing manager index shows China’s manufacturing is now contracting across the country.

As always, petchem markets have been leading indicators of this slowdown. And worrying, China’s polyethylene (PE) markets are showing no sign of any improvement as we head to year-end.

Volume grew 53% between 2008 – 2010 as a result of the government’s massive stimulus and bank lending programmes. But the brakes have been applied since then to try and stop inflation getting out of control.

In addition, China’s own supply portfolio is in the middle of major change, as the chart shows based on trade data from GTIS:

• Total demand in January-October was flat versus 2010
• Domestic production was up 2%
• Imports were also flat, whilst exports (from a low base) up 71%
• Middle East net imports were up 22% and SEA net imports up 13%
• Net NEA imports were down 21%; NAFTA down 37%; EU down 42%

There are also few signs that the situation will reverse quickly. Food price inflation is currently 11.9% and Premier Wen warned recently that prices might remain high during the winter.

This is not good news for any company hoping that growth in China during 2012 might substitute for the continued slowdown in Europe and the USA.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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