China Olefins Market E-News

In Oct. 2014, the prices of olefins and polyolefins still present downturns in China. The plants put into operation in H2 2014 have begun to impact the market. Meanwhile, the Catalogue for Encouraged Industries in Western China was implemented. However, in a short term, it may not draw back the scheduled operation of many CTO plants. Moreover, altogether 3 PDH plants are under trial production in eastern China. Therefore, the imbalance between supply and demand regarding olefins and polyolefins will not be greatly eased in Q4 2014. That is to say, in the following months, the prices of olefins and polyolefins will not recover. Enterprises are advised to consider how to avoid risks generated from the oversupply of polyolefins in China.

CCM made further research and found that though China’s polyolefin market stays depressed, it does not mean that the demand in China is saturated; instead, China still imports lots of polyolefins from foreign countries. In Jan.–Aug. 2014, the import of synthetic resin in China totaled about 21.60 million tonnes, occupying 33.93% of the apparent consumption. So, it is the oversupply of general-purpose polyolefins that accounts for the price declines of polyolefins. Besides, when CTO plants are put into operation, they primarily produce general-purpose polyolefins. This also intensifies the competition.

However, the traditional petrochemical enterprises do not just involve in price war. CCM learnt that some enterprises are now developing new PP products, which perform well in sales and prices. Therefore, petrochemical enterprises may resort to the adjustment of product structure and the production of high-end products to sustain their development.

In addition, the international price of crude oil shows a decline. In mid-Oct., both the WTI and Brent decreased by over 20% over the prices in mid-June. CCM believed that China, especially petro-based olefin plants will benefit from this price decline, no matter what accounts for this decline and how long the decline will last.

The RMB/USD exchange rate in this issue is USD1.00=RMB6.1493 on 8 Oct., 2014, sourced from the People's Bank of China.