By John Richardson in Shanghai and Malini Hariharan
China is set to see polyolefins demand growth of 30% or more this year, depending on the which particular grade, according to preliminary estimates prepared by companies and market analysts.
Even if you take into account last year’s relatively low growth rates (I say relative because despite the economic crisis, demand for some grades of PE grew by as much as 7% – which by itself would be the envy of most other countries), the 2009 forecasts take your breath away.
We will give you more details of the numbers next week.
As always with unexpected events, the search for after-the-facts reasons has begun.
One factor is the sharp drop in availability of recycled material that has forced converters to concentratre more on virgin resin.
A further reason is, of course, China’s enormous economic stimulus.
This has included a big rise in bank loans, a factor behind the third explanation behind the forecasts: A sharp rise in speculation.
“Non-traditional traders entered the market who only wanted to get their hands on polyolefins in order to use the 90 days’ credit for something else,” said an industry source.
“They would take the credit and use it to speculate on say equities. Sometimes they made such big profits out of the stock market that they were willing to sell PE and PP at a loss.”
The strong growth – combined with big cuts in production by Chinese producers in Q4 last year and early 2009 – help to explain the surge in polyolefin imports.
HDPE imports were up 73% in January-September and LDPE by 85%, according to China Customs.
The question now, obviously, is whether this great performance will be repeated in 2010.
We’ve been saying this so many times this year, but new capacities are a threat.
They keep getting delayed, but on paper China is set to increase PE capacity by more than 40% next year.
And will the Chinese government, worried about asset -price bubbles, reduce economic stimulus?