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China PE Demand In 2013: Flat Or Declining

Business, China, Company Strategy, Economics, Europe, Olefins, Polyolefins, US
By John Richardson on 01-May-2013

C2PEmargins.pngBy John Richardson

SENTIMENT continues to severely undermine polyethylene (PE) demand in China as converters, lacking confidence in a big new economic stimulus programme later this year, keep their raw-material purchases to an absolute minimum.

“It used to be the case that our customers bought four containers at a time. Now it’s down to two,” said a source with one producer.

The processors are also aware that a lot of new capacity is on the way. ExxonMobil Chemical is widely expected to soon ramp-up production at its two 650,000 tonnes/year metallocene linear-low density PE (LLDPE) plants in Singapore, but there has been no official confirmation. Several new plants are also due on-stream in China this year.

Such is the level of pessimism amongst producers that some are even predicting flat or declining growth in China this year. This is a far cry from the misplaced optimism of as recently as February.

Ironically, in Europe, despite its deep economic problems, producers there continue to do a great deal better than Asia in terms of margins, (see the above charts), as my colleague Nigel Davis points out in this article.

And the US is virtually printing money, thanks to shale gas.

If both European and US markets weaken substantially in Q2-Q3, might Western producers, particularly the ones in the US with a cast-iron long-term feedstock advantage, seek to raise exports to China?

The good news is that because resin inventories are low amongst converters in China, a return to positive sentiment could very quickly lead to a PE market recovery.

However, there is a growing consensus amongst producers, traders and converters that Beijing is not going to change course.

“China is busy dealing with its internal problems. As a result, it can no longer be the growth engine of the world,” the producer added.