By John Richardson
PERHAPS nobody should have been that surprised that China’s polypropylene (PP) market was weak in February and the first half of March.
Here is why:
· China saw its highest-ever monthly level of PP homo-polymer imports in January 2014 – 448, 000 tonnes, according to the New York-based trade data service, International Trader Publications. Converters were therefore sitting on high inventory levels when they returned to work in early February after the Lunar New Year holidays.
· Every year, labour shortages get worse immediately after the New Year in China’s manufacturing. This is the result of rising income levels in rural areas, which is persuading ever-larger numbers of migrant workers to remain at home, rather than return to their jobs in provinces such as Guangdong.
What is harder to gauge – and this is where the new ICIS Asia PP Price Forecasting report can help – is where the market is heading in the longer term, over the next 12 months.
We seek to separate these short term factors from the longer term issues – for example, to what degree has recent market weakness been the result of China’s new economic direction, including much tighter control over credit growth? Whilst, obviously, inventories will eventually be depleted and new workers found for processing plants in coastal China, a radical change in economic policy seems unlikely.
Equally important, of course, is the supply side of the story, which, again, is a key part of our new forecasting report – which is launched today. As you can see from the slide above, our consulting team takes a very conservative view of start-ups of new coal-to-olefins and methanol-to-olefins capacities in China, because of operational and margin issues.
The once-a-month report provides you with not only a 12 month outlook for pricing, but also margins.
And we include a sentiment index – i.e. where market participants think pricing is heading, which is not fed, however, into our price-forecasting model.
We also provide analysis and data on supply and demand and trade.
Click here for a more detailed sample of the kind of analysis and data that we will be providing.