Chinese PU Market Overview
CHINA ECONOMIC STATUS
PUdaily, Shanghai-According to data released by National Bureau of Statistics on July 15, in H1 of 2015, China's economic growth showed sign of stabilization, with the GDP posting a 7% growth rate to RMB 2,969 million year on year. Chemical market presented an unstable trend overall in H1 affected by international oil prices, massive maintenance at some plants, rebound in some industrial chains and demand from internal and external market.
In H1 of 2015, polyurethane raw materials market moved downward under unfavorable economic circumstance. According to PUdaily PU index, in H1 of 2014 and 2015, domestic polyurethane composite index was falling down, indicating a sluggish trend in polyurethane market. In H1 of 2015, although PO, polyols and TDI market performed well from Mar. to Apr., polymeric MDI, pure MDI and BDO markets went down, causing a downtrend which was seen especially in polyurethane composite, PU resin and rigid foam index.
CHINA PU TERMINAL MARKET
In H1 of 2015, China upholstered furniture industry got stunk in sluggishness and slowed down with total output declining by 5.92% year on year despite upturn trend at some famous brands. It is known that most factories were faced with decreasing orders, rising production costs and squeezing margins; some enterprises were eliminated from the market due to lack of competitiveness and capability of dealing with market risks. Furthermore, China upholstered furniture exports also failed to gain a favorable momentum owing to subdued external demand with sharp cut in export orders.
China automobile output and sale from January to June were 12.10 million units and 11.86 million units, up by 2.6% and 1.5% year on year respectively, while the output growth in H1 of 2015 continued falling down by 7% compared to last year although a large number of automotive enterprises tried to shore up the market via lowering prices.
It is notable that self-owned auto brands performed positively in H1 of this year; nonetheless, more efforts should be directed to quality improvement and independent innovation since self-owned auto brands would be faced with more pressure from joint venture enterprises which started to shift to medium and low-end market.
In H1 of 2015, China household refrigerator output totaled 49.30 million, falling down slightly by 0.04% year on year and output in June decreased by 0.92% to 9.48 million from May, up by 2.57% year on year. China household refrigerator market is slowing down due to approaching traditional slack season in July and the end of subsidy for purchasing refrigerators which started in June, 2012.
China produced 11.06 million units household freezer from January to June, increasing by 0.94% compared with the same period in 2014. The output in June posted an increase of 0.86% on a month on month basis while a decrease of 2.14% on a year on year basis.
Electric water heater market continues keeping a rapid growth in 2015 and output in H1 of 2015 reached 18.61 million units, up by 9.89% compared to 2014, and the output in June decreased by 3.89% from May while increased by 19.86% from last year. In June, electrical water heater was more popular than gas water heater, still dominating the market. Besides, medium and high end water heater gradually gained more and more attention.
In H1 of 2015, the output of domestic coatings was around 7.79 million tons, up by 1.42% year on year and output in June reached 1.51 million tons, increasing by 1.45% year on year. Overall, domestic coatings market was running steadily with about 1.4 million per month, increasing slightly compared to 2014.
In H1 of 2015, domestic coating market moved upward due to high raw materials prices despite unstable consumption market. According to relative data released by China Coating Industry, domestic coating profit increased by 14.3% from January to April.
With fierce competition in coating industry and enhancement of environmental awareness, waterborne coatings, powder coatings and various functional coating based on polyurethane raw materials are obtaining favorable development in recent years.
CHINA PU RAW MATERIALS
In the first half of 2015, domestic propylene oxide market kept going down overall and spot prices in east China were reported at RMB 10,800/ton at end June compared with RMB 12,100/ton in 2014, registering price loss of RMB 1,300/ton. Propylene oxide price kept upward pathway after Spring Festival triggered by reduced availability and increasing purchase from downstream buyers and price hit at RMB 12,700-12,900/ton on DEL and cash payment at late March.
Afterwards, propylene oxide price fell down to RMB 10,000/ton due to low season and ample imports supply. From May to June, propylene oxide price has been staying in tight range of RMB 10,800-11,300/ton despite some price hikes initiated by suppliers and ended H1 at downtrend note mainly due to slack season.
Polyether polyols prices were declining overall in the first half in 2015 offered at RMB 11,100/ton at end June, compared with RMB 13,250/ton in 2014 and RMB 12,300/ton at the beginning of the year, down by RMB 2,150/ton and RMB 1,200/ton respectively. Polyether polyols prices have been rising up at RMB 13,000/ton till early April underpinned by dramatic propylene oxide price increment and low inventory at ployols plants whilst the prices kept declining in the rest time of H1 affected by many factors, including propylene oxide price decrement, good imports availability with competitively lower price, automobile market increasing at slower pace and decreasing orders at upholstered furniture market but tempered in June by limited leeway to decline furthermore.
China TDI market hung onto downtrend in last year and prices tapped below RMB 12,000/ton before early March after the market reopened after Chinese New Year. Chinese local manufacturers tacitly and jointly slashed production in an attempt to pull up prices on the need to recoup losses on rising toluene this year and that margins had been squeezed in late 2014.
Coupled with continuous hikes in settlement prices and scheduled or intentional shutdown, the prices finally climbed step by step heading into the middle year and peaked at around RMB 13,500/ton early June. Looking at the demand side, terminal market furniture manufacturing was assessed to be around 6% lower from last year whilst automobile and coatings were reportedly slowing down expansion.
China polymeric MDI market has spent most time of the first six months in going down weighed down by more supply following expansion and new capacities in 2014 and weaker-than-last-year demand curbed by sluggish economic environment. The prices have already hit ten-year low at RMB 10,100-10,500/ton at end June compared with RMB 14,500-15,000/ton last year and RMB 13,000-13,900/ton at the start of this year; besides, price spreads among different brands have been narrowing down and imports were overall less competitive than last year.
As to Asian producers, most kept robust production except some planned outages. In addition, terminal markets including appliance and construction were slowing down significantly and some factories were trapped in capital pressure.
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