Limited impact of falling property prices in China on Asian polypropylene prices

The impact of falling property prices in China was seen to be limited for the polypropylene market in the near term, despite the material's use in the construction sector, as per PP market players, as per Platts. China's home prices fell for the fourth month in a row in August, an independent survey showed Monday, as more local governments loosened purchasing restrictions to prop up sales, AFP reported. The average price of a new home in 100 major cities was Yuan 10,771 (US$1752)/square meter last month, down 0.59% from July. PP is used in a variety of products in the construction sector, including pipes, cable insulation, roofing membranes, carpeting, materials packaging and road construction. "The housing inventory is pretty high and there's an excess of supply in many cities; property developers will be cautious about starting new projects," a PP manufacturer in China said Monday. Another PP manufacturer said late Friday: "Investment in real estate will be slow. I think the banks will tighten lending to private enterprises so they will not hold a lot of raw material. I think the economy will keep growing, PP and PE [polyethylene] demand will increase, but [it will be slow]," he added. Other sources said the impact on the PVC market was likely to be greater, given the widespread use of PVC piping in construction. A trader said home appliance manufacturers, including air-conditioning and refrigerator producers, "may keep very low operating rates" but overall PP demand was likely to increase in the medium to long term because other sectors like fiber were seen likely to grow. Data released August 22 by China's General Administration of Customs showed China's PP Homo imports over January-July rose 10% year on year to 2.2 million mt. PP Copol, used in making underground pipes, rose 1% over the same period. Global spot PP prices have softened since July as domestically produced PP in China has been cheaper due to new coal-based capacities coming on stream, as per market sources. There were eight CTO, Methanol to Olefins (MTO) and Coal to Propylene projects operating in China at end July with a total polypropylene capacity of 2.3 million m tpa, according to Platts Analytics. Two of the projects have come on stream in 2014; Yanchang Petroleum's MTO plant in June with a PP capacity of 300,000 m tpa and China Coal (Yulin) Energy Chemical's in July with the same PP capacity. China had a total PP production capacity of 14 million mt at end 2013, with around 11.9 million mt of it being utilized.