China’s PE market heads into the New Normal
on November 6, 2012

China PE Nov12.pngThis is a big week for politics. Today is the US Presidential election, which could have major implications for US-China trade, as Mitt Romney has said he will brand China a ‘currency manipulator’ on his first day in office. It is also the start of China’s Party Congress. The line-up of new officials will tell us a lot about whether the economic reforms outlined in the 12th Economic Plan will be carried through, or whether China will continue with its current unbalanced policies.

For the moment, however, we can stay in the ‘old normal’ and analyse the above chart, based on trade data from the invaluable Global Trade Information Services for China’s polyethylene (PE) market. It shows:

• Overall demand has risen just 4% since 2010, and only 2.4% in 2012
• PE demand is normally equal to GDP, which was reported at 7.4% in Q3
• This highlights the unbalanced nature of current economic policies

• China’s production is actually down 2.4% in 2012, due to low refining rates
• As in the West, today’s record oil prices are destroying oil product demand
• This has provided temporary relief for imports, up 7% versus 2010

• Middle East and SEA producers continue to benefit, up 44% and 32% versus 2010
• But NAFTA is still down 44% and EU imports are down 43%

During the Supercycle, planners could forecast demand with just a spreadsheet and a set of growth numbers. Today, the world is already becoming far more complicated, as political and social issues begin to crowd out economics. China’s PE market is providing a valuable insight for us into how this New Normal will likely develop.

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