China’s polyethylene demand growth remains slow

China PE2 Mar12.pngThere are increasing signs that China’s economic growth is slowing. Local gasoline and diesel prices are now (as in Europe) at record levels. Gasoline is Rmb 8.2/litre, the equivalent of $1.20/l, or $4.40/US gal.

Unsurprisingly, this leaves people with very little spare cash, especially with food price inflation still at 6.2%. Equally, with rumours of coups in Beijing following Bo Xilai’s purge, the communist party clearly has other things to worry about than a further economic stimulus package.

Polyethylene has been a good indicator of the slowdown as it has developed over the past year. The above chart, using GTIS trade data (Global Trade Information Services), shows combined January/February volumes (red column) compared to 2011 (green) and 2010 (blue):

• Total demand is up only 12% versus 2010, well below GDP growth
• Local production is up 28%, despite last month’s slowdown
• Overall imports are down 1%, whilst exports are up 160%
• Middle East and South East Asian net imports have grown rapidly
• North East Asian, NAFTA and EU net imports have fallen sharply

Unsurprisingly, as the blog noted on Monday, this slow growth is now causing Asian/Middle East producers to target other markets, particularly Latin America. They have to sell their product, or shutdown plants.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. 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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