Polypropylene demand from China subdued as inventory piles on manufacturing curbs

13-Aug-08

The Chinese government has implemented rigorous cuts in processing and manufacturing activities during the Beijing Olympic Games. Many thousand diverse manufacturing facilities have been compelled to reduce production or completely halt operations in a serious bid to improve local air and water quality and public security during the games. Polypropylene inventories continue to pile up, subduing demand from the country. Buying intentions pegged below US$1800/MT CFR are fuelling concerns that the markets will cave in further. Pressured by this concern, most suppliers continue holding offers toward China, with typical offers around US$1900/mt CFR China. In fact, in the absence of demand, market players predict a very severe fall in buying intentions to levels as low as US$1700. Lackluster demand from Asia’s largest consumer could coerce key producers to reduce plant operating rates. This listless demand is definitely expected to continue till the conclusion of the Olympic Games, hence South Korea's Polymirae is considering an almost 50% cut in operating rates later this month. This reduction is in addition to the 10% cutback announced last week at its 650,000 tpa PP plant in Yeosu.