Home Blogs Asian Chemical Connections China Polyethylene Sentiment Recovers

China Polyethylene Sentiment Recovers

Business, China, Company Strategy, Economics, Polyolefins
By John Richardson on 16-Dec-2012

PEprices17Dec.pngBy John Richardson

CHINA’S polyethylene (PE) market is enjoying a mini-rebound on improved confidence in the ability of politicians to turn the economy around, the blog has been told.

There seems to be a feeling out there that more help is on the way for the small and medium-sized enterprises (SMEs). The SMEs, which make up the bulk of the country’s polymer buyers and account for most of China’s economic and activity and employment, have struggled since April 2011.

“As a result, restocking is taking place in what is traditionally a quiet time of year,” said a source with a global polyolefins producer.

“This is partly because stocks were low in October, but is also due to the belief that Xi Jinping and the rest of the Politburo really mean business, which was underlined during Xi’s tour of Guangdong last week.

“The new leaders are talking about serious economic reform, which will involve raising the role of the private sector in the economy, and have already started a major crackdown on corruption.

“When Hu Jintao came to power ten years ago, he talked about dealing with corruption but it was all talk – nothing happened. This time it seems to be different.”

And he added that Xi’s Guangdong tour further helped to boost sentiment because he dispensed with heavy security during his walkabout, giving the impression that he is a “man of the people”.

But while cost-advantaged US and Middle East were reaping the benefits, he cautioned that substantial further price rises would have to occur for Asia ex-China producers to feel the benefit.

As we discussed last month, Northeast Asian (NEA) integrated naphtha-based high-density polyethylene (HDPE) margins were recently at their lowest point since 2000.

Let’s not look a gift horse in the mouth, though: Last week saw integrated NEA HDPE margins increase by $54/tonne, thanks to a $20/tonne increase in prices and lower feedstock costs, according to the ICIS pricing Weekly PE Margin Report.

A question which might be asked in a many a boardroom is, “Will it last?”