The usual flow of China’s polyethylene (PE) production data has been interrupted since the start of the year. But the good news is that normal publication has now been resumed. Thus the chart above shows market developments between January – April, versus 2012 and 2011, including trade data from Global Trade Information Services.
PE’s position as the largest polymer means that it provides excellent insight into wider developments in the economy, as well as highlighting China’s strategic approach to imports. Year to date volumes certainly support the view that the economy is continuing to slow as the new leadership targets corruption and the housing market bubble:
• The overall market is up just 8% (red column) versus 2011 (blue). There has been a welcome recovery versus the decline seen in 2012 (green), but the data highlights once again the lack of connection between PE demand growth and reported GDP growth
• Imports are up 10% and have temporarily gained market share since 2011, with China’s own production up only 5% due to the lack of major new domestic capacity coming online. This situation is of course now starting to change, as new naphtha and coal-based plants start-up
• Strategic rather than financial concerns continue to drive China’s import sourcing decisions. Its focus is on doing business with the ME (the oil for markets strategic corridor) and SEA (the free trade agreement). Otherwise, its purchases seem increasingly restricted to its need to buy hard-to obtain grades from NAFTA/USA
• Thus ME imports are up 28% and SEA up 18%, whilst NAFTA is down 10%, NEA down 3% and the EU (from an already low volume) down 1%
It is still early days for the new leadership, but PE market developments provide some clear indications of the likely path they intend to follow.