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China PE prices to bottom out in mid Feb on restocking

December 28/2011

(ICIS) -- Chinas polyethylene (PE) prices are expected to bottom out in mid-February on restocking activity following a persistent downtrend, industry sources said on Tuesday.

The prices of different PE grades fell by 2.7-7.5% in the past six weeks on weak demand, according to ICIS.
Restocking demand will be significant because most importers have been keeping low inventory in 2011 as a result of tight credit and weak downstream demand, and some have reduced their December stocks to minimum levels ahead of the Lunar New Year holiday on 22-28 January, local traders said.

PE prices will not fall further in the first quarter because the current prices of the different PE grades are already close to or at cost for naphtha-based PE producers, according to some local traders.More naphtha-based PE plants will reduce production rates in the first quarter if their margins fall further, they said.

The cash margin of integrated naphtha-based producers was estimated at USD 147/tonne (EUR 113/tonne) for the week ended 16 December, according to ICIS.

A number of PE producers in Taiwan and South Korea have been running their PE plants at reduced rates because of thin margins.

The Chinese economy will be at the tail-end of a down-cycle in 2012. Its expected to improve only in 2013, a Beijing-based trader said in Mandarin.

Chinas monetary policy is expected to remain tight next year which will in turn curtail the domestic plastics demand, local traders said.

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