China’s polyethylene demand growth remains slow
on March 31, 2012

China PE2 Mar12.pngThere are increasing signs that China’s economic growth is slowing. Local gasoline and diesel prices are now (as in Europe) at record levels. Gasoline is Rmb 8.2/litre, the equivalent of $1.20/l, or $4.40/US gal.

Unsurprisingly, this leaves people with very little spare cash, especially with food price inflation still at 6.2%. Equally, with rumours of coups in Beijing following Bo Xilai’s purge, the communist party clearly has other things to worry about than a further economic stimulus package.

Polyethylene has been a good indicator of the slowdown as it has developed over the past year. The above chart, using GTIS trade data (Global Trade Information Services), shows combined January/February volumes (red column) compared to 2011 (green) and 2010 (blue):

• Total demand is up only 12% versus 2010, well below GDP growth
• Local production is up 28%, despite last month’s slowdown
• Overall imports are down 1%, whilst exports are up 160%
• Middle East and South East Asian net imports have grown rapidly
• North East Asian, NAFTA and EU net imports have fallen sharply

Unsurprisingly, as the blog noted on Monday, this slow growth is now causing Asian/Middle East producers to target other markets, particularly Latin America. They have to sell their product, or shutdown plants.

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