Increasing plastics demand in China won’t be enough to reverse glut: survey

China’s consumption of plastic could grow by up to 7 per cent this year after stalling in 2011, but the rebound will not be enough to overcome a regional supply glut that will curb the output of plastic manufacturers and pressure the petrochemical market.

According to a survey of five industry consultants conducted by Reuters news organization, Asian plastic exporters, who rely heavily on demand from the world’s second-biggest economy, face having to scale back production further this year, in turn cutting demand for naphtha, which is the key oil product used to make plastic.

The consultants forecast China’s consumption of plastic by Asia’s top importer growing around 5-7 per cent, up on last year’s flat growth but well down on the double-digit growth in 2009-2010.

China has forecast its economy will grow 7.5 percent in 2012, the slowest in eight years, with exports crimped to traditional customers such as Europe and the U.S.

China’s industrial production also weakened sharply in April, while the central bank recently cut the amount of cash banks must hold as reserves, in a move to support the economy.

More than 70 per cent of the polyethylene consumed in China goes into packaging, while more than 60 percent of polypropylene is used for consumer and electronic goods, data from the China Petroleum and Chemical Industry Federation showed.

The full Reuters report can be accessed at this link.