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By John Richardson

ANOTHER theme that emerged from last week’s Asia Petrochemical Industry Conference (APIC) in Kuala Lumpur, Malaysia, was the shock at the extent of the price declines in the key China market.

In polyolefins, the slump in pricing has been the most pronounced during a period when the consensus opinion was that both pricing, and demand, would be strong as a result of the “renewed fiscal stimulus” story. Asian polyethylene (PE) pricing was down by a further $10-40//tonne last week with polypropylene (PP) $20-40//tonne lower, according to ICIS pricing.

“The extent of demand weakness in the China market was unexpected. I have never known it as bad as this. We understand some of the reasons, but not all of them. We are still searching for a full explanation,” said a sales and marketing manager with one major polyolefin producer.

Some producers and traders claimed that demand would, however, soon come roaring back.

 “This is just a classic tactic by the Chinese. As usual, they have stopped buying and are waiting for pricing to bottom out. The second half of the year will be strong,” said a sales and marketing manager with a second polyolefin producer.

But when the producers and traders were asked to justify why H2 would be better than the first half, they were not able to offer any detailed explanations. The common belief was that the Chinese market had always been strong, in their memory at least, and would thus remain so.

We beg to differ. China is undergoing major economic structural changes and it more obviously confronts an exceptionally weak export environment for its manufactured goods.

It is time for some painful, but nevertheless essential, scenario planning.

It is not only China we have to worry about, of course. As fellow blogger Paul Hodges pointed out yesterday, global economic problems have put us in, potentially, a worse position than in 2008.

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