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Depressed China Demand Continues

Business, China, Company Strategy, Economics, Middle East, Polyolefins
By John Richardson on 19-Mar-2012

By John Richardson

ANOTHER week and sadly a repeat of the same old story: Depressed polyolefins demand in China.

Pricing did, however, increase – by $10-50/tonne in the case of polyethylene (PE) and $10-40/tonne for polypropylene (PP), according to assessments by ICIS pricing for the week ending 16 March.


PE19March2012.jpgBut our colleagues at ICIS pricing warned that converters continued to struggle with poor demand for their finished products and constrained credit availability, as we have been reporting on the blog for many months now – along with the many other factors shaping growth this year.

Recent price rises had deterred big-volume purchases, they added.

Increased pricing has, in part, been driving by operating-rate cuts.

In Q4 of last year, many Asian crackers were reported to be running at 100 percent, despite weak markets. But now Japan is running at 80-85 percent, Taiwan at 90-100 percent, China and South Korea at 90-100 percent and Southeast Asia (SEA) at 90 percent, added ICIS.

There are also specific factors limiting the supply of C4s-based linear-low density (LLDPE). These include the lingering impact of an outage at the Al-Jubail complex in Saudi Arabia earlier this year, and unconfirmed production problems at a plant in SEA, said an industry source.

If you take a very short-term view of margins, the effort to pass-on strong naphtha costs appears to be reaping results.

Low density PE (LDPE) and high-density PE (HDPE) margins reached historic lows earlier this month.

But for the week ending 16 March integrated Asian LDPE margins were back in positive territory, said the ICIS Weekly Asian PE Margin report. Integrated HDPE margins increased by $61/tonne on better pricing, a fall in naphtha costs and a slight improvement in co-product credits, but they remained negative.

Unless there is a big improvement at the converter end of the business, the more that margins improve, the more will processors resist further price hikes.