Polyolefin weakness likely to continue in China

28-Jun-10
Downward pressure is likely to continue on polyethylene and polypropylene prices in China over the next few months on account of several factors including a persistent inventory overhang, new supply and weak construction and auto markets, along with falling US PE prices that raising concerns over very competitively-priced imports from USA as per ICIS. A further negative factor in China could be the strengthening yuan, which could encourage price-cutting by local suppliers. The weakness in the Chinese market is contrary to the situation in Europe, where tight supply is keeping prices firm and attracting imports. The polyolefin inventory overhang in China is a result of the surge in bookings from overseas in late November and early December, amid the affects of new supply in China and the Middle East. The construction sector in China is being affected by all the government measures to cool the property sector, whereas tighter credit conditions are hurting automotive sector. Auto manufacturers are saddled with high inventories as a result of vehicles manufactured earlier this year on the assumption of extremely strong growth levels. Tighter credit in this sector is reducing private purchases.
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