In December 2012, polyethylene (PE) traders had robust stockpiles in anticipation of a bumper year in the Chinese market, on the assumption that the economic recovery of late 2012 and January 2013, amid politically motivated stimulus spending, would continue throughout 2013, as per ICB in ICIS. However, the outlook has radically shifted, as China's demand for PE is even lower than immediately ahead of the Lunar New Year in mid-February. China's PE spot prices across all of the grades fell by US$5-40/ton during the week ended 15 March. This marked the third week in a row of declining prices.
Before the New Year, most traders had already pulled out of the market to avoid cargoes being stranded at ports during the holiday period. Trading has come to a virtual halt and re-exports have increased. Re-exports comprise resin shipped to China, held in bonded warehouses, and if unsold in the domestic market, shipped to other countries. The expected strong recovery after the holidays, did not materialize because of policy uncertainty. Vincent Andrews, analyst with investment bank Morgan Stanley, said that "anecdotal evidence and benchmark integrated PE margins in Northeast Asia suggest the anticipated demand recovery may be faltering".
The absence of stimulus measures and steps by the new Chinese political leadership to stimulate the economy has surprised many players. Restrictions on the property market, reduced liquidity in the banking system and lower new lending in February have reduced PE buying," said the Singapore trader. "People are worried that Beijing will have to take more measures to cap property prices, as what has happened so far is unlikely to work. They think that eventually interest rates will have to be increased because overall inflation is also rising. This is further dampening activity."
25-Mar-13 
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