Industry consultant Robert Bauman may have solved the mystery of China's disappearing resin demand.
Chinese imports of foreign polyethylene and polypropylene were below expectations in 2004 and 2005, according to government data. This led some observers to believe the Chinese plastic market had weakened, said Bauman, who is a Houston-based vice president for polymers at Nexant Chem Systems. But the results were a bit confusing, since Chinese imports of other major products such as steel and oil continued to increase. This led Bauman to investigate, and what he found was that China essentially adjusted to the market without losing momentum.
``There was a structural change in the global resin market in 2004 and 2005,'' Bauman said at a business conference hosted by the Plastindia Foundation, Feb. 11-12 in New Delhi. ``There was a high fly-up in prices, and that signaled China to scour the world and buy all the used product they could find.
``China became the world's largest importer of scrap and recycled polymers,'' he said.
China's imports of those materials jumped 35 percent in 2004 and 70 percent in 2005. The country's domestic recycling market also accelerated as it became more profitable. In some cases, dealers were getting almost 50 cents per pound for recycled PE and PP. Bauman said used garbage bags even were being recycled because of their profit potential.
Almost 40 percent of the plastic scrap used by China in 2004-05 was provided by Hong Kong, with the U.S. providing about 11 percent.
``If you add the scrap and recycled material to the virgin resin purchases, you get back up to the normal 11-12 percent growth China had been having,'' Bauman explained. ``Demand hasn't declined, but sourcing has changed.''
Overall, the wave of Asian plastics growth appears to be unabated. The continent is on track to become the world's largest consumer of PE and PP resins by 2008, Bauman said. China will continue to be the world's largest importer of both materials in spite of new domestic capacity.
Asia is expected to add more than 4.4 billion pounds of resin demand each year between 2005 and 2008. By 2010, the region will account for half the world's PP consumption. Today, China alone accounts for 18 percent of global PP demand and 15 percent of global PE demand.
South Korea currently is China's largest PE/PP supplier with a 20 percent share, but the Middle East eventually will take that spot as more resin capacity comes on-stream in Saudi Arabia and other countries, Bauman said.