OREANDA-NEWS. July 27, 2011. China’s imports of most petrochemical products continued to decline in June as domestic demand is being constrained, partly by limited access to credits amid continued monetary tightening by the government, industry sources said.

Spikes in international prices of the products also led some Chinese buyers to hold back purchases during the month, they said.

Chinese industries are also coping with a power shortage that may have contributed to weakness in demand for petrochemicals, said an analyst from China Petroleum and Chemical Industry Federation (CPCIF). Power consumption usually peaks during the summer months of June to September.

In June, the country’s propylene imports fell by a quarter to 97,336 tonne, while it took in 30% less butadiene (BD) compared with levels in the same period last year, official data from China Customs showed.

Surging Asian BD prices, which were quoted at around USD 3,800/tonne (€2,660/tonne) CFR (cost and freight) northeast (NE) Asia in mid-July. Prices of the olefin product surged by more than USD 300/tonne in just two months from mid-May, according to ICIS data.

Meanwhile, China halved its benzene imports to 6,100 tonnes, according to the China Customs.
“Most benzene importers kept [a] pessimistic stance in June because of tight funding situation and weak demand in the market, plus power restriction,” said one industry source.

This year, China’s central bank has so far raised its key interest rates three times and hiked banks’ reserve requirement ratio six times. The reserve requirement refers to a part of deposit that must be parked with the People’s Bank of China, effectively restricting the amount of banks’ loanable funds.

Meanwhile, the country’s exports of most petrochemical products have been rising in the past months, supporting the view that domestic demand is weak. But the actual volume of shipments abroad remained small compared to imports.

China has also been beefing up its domestic capacity for petrochemicals, given its strong domestic requirement and mitigate its heavy reliance on imports.
In the third quarter of this year, a total of 2.8m tonnes/year of new purified terephthalic acid (PTA) capacity is expected to come on stream in China.