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June China Lending Disappoints

Business, China, Company Strategy, Economics, Middle East, Polyolefins
By John Richardson on 05-Jul-2012


By John Richardson

POLYETHYLENE (PE) and polypropylene (PP) offer prices were reportedly on the rise across Asia earlier this week on increasing geopolitical tensions over Iran that led to a hike in crude prices.

“Butene-grade linear-low density (LLDPE) offers have increased by $40-50/tonne,” said a source with a major producer.

September LLDPE futures contract prices on the Dalian Commodity Exchange also increased on Wednesday in response to the Tuesday rise in oil prices.

This all followed a very slight uptick in pricing for the week ending 29 June. For instance, some grades of PP edged up by $10-30/tonne, according to ICIS, as this slide illustrates:



But as the source wisely pointed out, “We should make hay while the sun shines as I don’t think it will last.”

In the case of oil, for instance, the rally was very short-lived: By the end of trading on Wednesday, prices had fallen back again as traders once again focused on the grim economic backdrop.

The news from China also continues to deteriorate. Only Yuan700bn of new loans were likely issued in June compared with earlier estimates of Yuan1trillion. Lower-than-expected borrowing was the result of lack of demand for credit, even though the supply and affordability of financing has improved.

Lending growth has also been slowing down in 2012.

Reports of disappointing demand for loans came at the same time as the release of the China HSBC services purchasing managers’ index for June. The index fell to 52.3 from 54.7 in May,  with services firms growing at their slowest pace in ten months.

Meanwhile, unconfirmed reports suggest that the Saudi Polymers plant has come on-stream. This comprises two 550,000 tonne/year high-density polyethylene (HDPE) plants and a 440,000 tonne/year polypropylene (PP) facility.

And in June, QAPCO brought its 300,000 tonne/year low-density PE (LDPE) facility onstream.