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, PP market participants said Monday.
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 ($1,752)/square meter last month, down 0.59% from July, AFP reported, citing the China Index Academy data.
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.
Latest 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.
A second PP trader said: “The property downturn was not affecting pp prices.”
A third trader agreed, saying: “I don’t think it will affect much. PP used for food packaging will not fall. For housewares will not fall much. But export is weak now. CTO [Coal To Olefins] projects and lower crude oil prices [are key factors]” he added.
NEW CAPACITY
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, market sources said.
Domestic China prices were seen around Yuan 11,000/mt ex-works ($1,431/mt) in Monday’s trade, after being assessed at Yuan 11,350/mt ex-works basis Friday, down from Yuan 11,600/mt on July 16.
Domestic PP Raffia grade was assessed at $1,500/mt CFR Far East Asia last Friday, down $30/mt from July 16.
There were eight CTO, Methanol to Olefins or MTO and Coal to Propylene or CTO projects operating in China at end July with a total polypropylene capacity of 2.3 million mt/year, 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 mt/year and China Coal (Yulin) Energy Chemical’s in July with the same PP capacity, according to Platts Analytics.
China had a total PP production capacity of 14 million mt at end 2013, with around 11.9 million mt of it being utilized, according to Platts Analytics.
– Platts.com
