Slump in plastic demand in China to impact naphtha in Asia

07-Jun-11
Appetite for naphtha in Asia is falling in line with a slump in Chinese plastics consumption in 2011, on measures taken by the Centre to slow runaway economic expansion. As per Reuters, oil investors are watching Chinese demand growth closely for any signs of a sharp slowdown, as consumption in the world’s second-largest economy has driven global fuel demand growth for the best part of a decade. HSBC’s China Purchasing Managers’ Index (PMI) fell to a 10-month low in May, adding to evidence that the world’s fastest-growing major economy is slowing. This came after April industrial output growth eased more than expected. “We are now at the tipping point where the liquidity-fuelled boom which we had in the last two years is coming to an end,” said Paul Hodges, chairman of chemicals consulting firm International eChem. The fall in margins might force crackers to cut runs in countries such as South Korea, Asia’s top producer. China is the only big outlet for North Asian exporters and without China, Asian cracker runs may be pushed down below 90% rates. The worst run cuts were when operation rates fell to an average 75 percent in 2008 when the financial crisis hit. China’s imports of polyethylene fell 16% from a year earlier in Q1-11 to 1.18 mln tons data from the China Petroleum and Chemical Industry Federation (CPCIF) showed. Implied consumption of polyethylene fell 1.5% in the same months against a 7-10% expansion in the last two years, while naphtha imports fell 4% in the first four months of the year. The slide in plastics consumption comes as petrochemical supplies to China surge from the Middle East, eating into a market that typically belonged to North Asian producers. The twin impact of rising supply and falling demand may force many crackers in Asia to pare output as competition for a shrinking market erodes margins. The possibility that fundamentals will weaken further is prompting many in China to sell stocks to limit losses. Many Chinese players were kind of expecting a super cycle in 2011 after a brilliant 2010. This resulted in a lot of pre-buying last year. But weaker markets this year have led traders and distributors to de-stock. Sales from stocks are bloating supply more, pushing domestic prices down and encouraging traders to re-export cargoes from China to Latin America and elsewhere. Beijing has taken several steps to slow growth and inflation and has withdrawn some of the economic stimulus measures such as tax breaks on smaller cars or subsidies to buy home appliances that the government enacted during the financial crisis. Car sales in China have slowed after years of speedy expansion.
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 Kautex KB15 blow moulding Machine

Kautex KB15 blow moulding Machine