OREANDA-NEWS. July 09, 2013. China will see a new round of PP and PE capacities coming online in the very near term, report players in the country, as per ChemOrbis. By the end of the summer, a total capacity of 850,000 tpa for PP and 1.2 mln tpa for PE is slated to come online in China.

Wuhan Petrochemical, a joint venture between SK Group and Sinopec, began test runs at its PP and PE plants in Wuhan City, Hubei in mid-June while commercial runs are scheduled to be reached later in July, said players in China. The producer has a PP plant with a capacity of 400,000 tpa and two PE plants for HDPE and LLDPE, each with a capacity of 300,000 tpa. Players in the country also reported that Sichuan Petrochemical started test runs at its 450,000 tpa PP plant in early June.

The company had delayed the start-up of its 600,000 tpa PE unit to July, according to reports in May. Earlier this year, Guangzhou Petrochemical was also reported to be planning a start-up at its 200,000 tpa PP plant in Gungdong Province by July while Qilu Petrochemical was planning to start up its 200,000 tpa HDPE plant in the first quarter of this year and commenced test runs on June 10. However, no further updates have been released so far about these plants.

When looking at the recent situation in China’s PP and PE markets, import offers from overseas producers have started to be revealed with increases for July recently. Producers mostly blame firm upstream costs as well as their limited availability for their increase targets even though demand is widely considered unsatisfactory. According to ChemOrbis, on the other hand, the impact of the imminent start-up of these new capacities has started to be felt in the domestic market, where some discounts of up to CNY300/ton (USD49/ton) are being observed.

"The recent softening in crude oil and LLDPE futures prices along with concerns regarding the new PP capacities are causing hesitation among buyers, resulting in limited buying interest," a distributor said.