China's expected move to ease restrictions on the importation of certain petrochemicals will likely raise the price of polyethylene (PE) in Taiwan sometime in the fourth quarter, analysts said yesterday.
According to reports, China has approved the purchase of 500,000 tonnes of imported PE -- the core material used in the production of items such as grocery bags, plastic bottles and toys -- by local firms, signalling a shift away from efforts to bolster its domestic PE industry, restricting foreign imports.
"The present Chinese policy is to increase domestic demand and supply it purely by mainland manufacturers," said an executive at USI Far East Corporation (臺灣聚合), one of Taiwan's major listed petrochemical firms.
Beijing has maintained a tight choke hold on foreign imports since last November when the government began imposing tougher regulations on the issuing of permits to buy imported PE, the executive said.
Angela Hsiang, an analyst at China Securities (中信証券), said that while static spot prices for PE suggest China hasn't yet moved to ease the restrictions, Taiwanese companies are confident a policy adjustment is on the cards.
It is widely expected among local firms that China will purchase 500,000 tonnes of PE by the end of August in preparation "for strong demand from agriculture firms in the fourth quarter, which is the traditional peak season," Hsiang said.
And while Taiwanese plastics companies sell most of their products in the domestic market to down-stream manufacturers, the impact of increased Chinese demand would allow a moderate hike in domestic contract PE prices, she said.
One reason for China's low inventory is the ban it placed on PE imports from South Korea in June in retaliation for high Korean tariffs on imports of Chinese garlic.
Recent reports claimed that China would end the ban in August, but Hsiang said Beijing had not yet openly made a commitment to do so. But she did concede that such action was likely as South Korea is one of China's main suppliers of PE and China would be unable to make up the shortfall in the fourth quarter that would result from maintaining the freeze.
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