China's PP imports to rise?

22-Nov-06

Despite investment plans for adding over 6 million tons of new capacity over the next 4 years, China will continue to be a major importer of Polypropylene (PP), as per a report from AMI Consulting points. From 2006-2010, new capacity totalling over 6 million tons is slated to come on line in China. As per figures available for the year 2005, China processed 8.4 million tons of PP and was the world's largest importer of PP with imports of over 3 million tons. At this rate, China is crucial to keep global supply and demand in balance. Analysts opine that 6 mln tons going onstream in China shortly will result in a gradual fall in imports and a reduction in PP plant utilization rates around the world. However, AMI's report assesses the possibility that exports into China rather than falling may actually reach 5 million tons by 2010. AMI predicts that the rate of growth of demand for polypropylene used in the domestic economy will accelerate on the back of fast growing consumer expenditure and demographic shifts towards urban living and that this shift will emerge as the key driver of demand for PP. In 2005 68% of PP was used for extrusion applications and 32% for injection moulding reflecting the high output of woven flat yarn (accounting for 25% of all PP usage in 2005) and BOPP film (which has seen significant investment in new capacity over the past five years). However, highest growth has generally been achieved by injection moulding sectors notably packaging, automotive and appliance applications reflecting more recent investment in these areas and growing local demand. Exports of products using PP accounted for about 25% of the total Chinese market. In recent years exports have grown faster than domestic consumption. Whether this will remain the case will depend on the extent to which China can continue to leverage its low cost base. Given government policy to encourage domestic consumption and reduce the economy's reliance on exports, AMI expects that local demand will be a more significant driver for PP markets in the period to 2010.