Market Reports

2012 Plastic Annual Report-Bull Market VS Bear Market

2013-02

 

 

Bull Market VS Bear Market

Annual Plastics Report 2012

 

Author: Kim Lin- Marketing Department Date: 6 February 2013 Website: www.sunta.hk

Table of Contents   

2012 Plastics Market Summary. 2

International Oil Price in 2012. 2

Comparison of International Oil Price（WTI）in 2012 with 2011——Rebound. 3

Plastics Trend Review 2012. 4

Analysis of Market Factors in 2013. 5

Global Economy. 5

Chemical Plants. 9

Forecast of Plastics Market in 2013. 10

Statistical Results of Corporate Business Environment Survey in 2012. 13

Appendix 1: Asian Chemical Plant Device Events in 2013. 24

Appendix 2: Major Plastics Event 2012. 27

 

2012 Plastics Market Summary

In 2012, following the oil price approaching to US$110/barrel, the market confidence of plastics market is encouraged. In the second half of the year, the price of Styrene monomer continued to increase, causing an increase in the material cost. However, the factory supply could not match with it and the price stagnated. Some chemical plants curbed their loss through production reduction. The supply has thus decreased and price became stable. The market price of the whole plastics market was fluctuating greatly.

International Oil Price in 2012

Figure 1: International Oil Price Trend (2012)

 

Source: NYMEX

Table 1: Volatility of WTI (2012)

The average WTI in the first half of 2012 was US$98.27/barrel, while being US$90.19/barrel in the second half. The turning point was in the period of May to June. As Euro debt spread, WTI dropped from a 5-week high to a 8-month low. The yearly average is US$94.21/barrel, a decrease of 8.1%

Comparison of International Oil Price（WTI）in 2012 with 2011——Rebound

Figure 2: International Oil Price Trend (2011-2012)

 

Source: NYMEX

Table 2: Volatility of WTI (2011-2012)

WTI in 2012 was similar to that in 2011, both rebounded and became stable. The average in the 2 years is 84.21 and 95.08 respectively, with a volatility of 8%. The volatility between the highest point and lowest point is around 30%, which is of regularity.

 

 

 

 

 

Plastics Trend Review 2012

Figure 3: Price trend of plastics materials (2011-2012) Source: HK Traders

 

When oil price dropped by 30%, the market turned weak and the price went down

Table 3: Volatility of Plastics Materials (2011 -2012)

The price difference between GPPS, HIPS and ABS contracted gradually and their prices became close in 2012. When comparing with that in 2011, the market price of GPPS rose 3.7%, HIPS rose 1.8%, ABS and HOMO PP dropped 7.3%. When it comes to May and June, their prices became weak as WTI fell by 30%. At the end of the year, the price difference contracted again and there was a US300/ton difference between the HOMO PP curve.

 

Figure 4: The Price Trend of GPPS HIPS & ABS (2012)

 

Source: HK Traders

Table 4: Volatility of Plastics Materials (2012)

GPPS, HIPS and ABS rose by different extents in 2012. GPPS rose 25.5%, HIPS rose 13.7% and ABS rose slightly by 1.7% in 2012. The price difference contracted from US$230/ton to US$60/ton throughout the year

Table 5: PP Price Trend (2012)

 

Source: HK Traders

Table 5: Volatility of plastics materials price (2012)

There are ups and downs in the price of PP in 2012. In May, PP dropped for about 10% from the high point. It became generally stable in the second half of the year. Throughout the year, HOMO PP rose by 5.2%, while BLOCK PP and RANDOM PP fell by around 3%.

Analysis of Market Factors in 2013

Global Economy

2012 is a year of complication and change. The Euro Debt Crisis went back and forth. There was unrest in the Middle East. Sovereignty disputes were one after another. In this year, some countries underwent a change in the government. “The effect of change in the government” brought both uncertainties and new ideas to the economy in 2013. How will the world economy recover in the New Year? And how will the major economies perform?

European Economy: a slow recovery

 

The new debt purchase plan introduced in 2012 by the European Central Bank has greatly reduced the risk borne by the Euro Zone due to comprehensive rescue plan was seek by major countries like Italy and Spain. The GDP in the second quarter decreased 0.2%. The GDP in the third quarter decreased 0.1%. Overall, there was a slowing sign.

In Oct 2012, the European Stability Mechanism, the Permanent Euro zone bailout fund has come into effect. The lending capacity will increase to €500 billion in the next 18 months. In addition, there are €192 billion of the European financial stability tools for Portugal, Ireland, Greece's economic adjustment program. Apparently, the capital structure of the response to the crisis in the Euro zone is a strong support of the economic recovery in Europe in 2013.

 

 

 

 

 

US Economy: Stably developing

 

Different from the Euro Debt Crisis which is between Europeans countries, the financial problem in the US is the opposition between different parties in the US itself. The “Fiscal Cliff” warning was off temporarily. Solutions are being sought in financial policies of expenditure cut and taxation increase.

The Fed is optimistic about the US economy growth. The property is expected to recover. Consumption expenditure will continue to grow. The GDP will grow by 3.5%. Also, President Obama, who successfully to have his second term, may launch more economic stimulus policies. The economic performance of the US is expected to be optimistic.

Japan Economy: Grow stably

 

Japan expects her economic activities to grow by 1.2% in 2013, basically the same as the forecast in Oct 2012. A large scale economic stimulus and further ease of monetary base will further induce economic growth. At the same time, the rebound of external demand will support the growth.

The focus of Japan is to induce a higher economic growth rate and inflation rate by continuing the stronger loose monetary policy, in order to stimulate the market demand and consumption. Combined with relevant policies to promote economic development, in 2013, Japan's economy will steadily grow.

China Economy: Rebound mildly

 

Under the impact of the Euro Debt Crisis since 2012, China's economic grow was slipping. For the first three quarters, China's economic growth rate was 8.1%, 7.6% and 7.4% respectively. The "Steady growth" policies boosted recovery in the fourth quarter to 7.9%. Overall, the growth rate remained slightly higher than 7.5%, indicating the Chinese economy is gradually stabilizing.

 

The average growth in investment in China in the various fiver-year plans were 17.3%, 24.1%, 28.5%, 18.8%, 19.8% respectively. 2013 is the third year of planning when investment accelerates and will be conducive to the growth of investment and economic recovery. Also, the change of government effect of the Chinese government may prompt further acceleration of investment, so as to promote economic growth. And under the support of earlier regulatory policies, it is blatant that China's economic growth will continue moderately.

Chemical Plants

 

Chemical plants have been aware of pre-selling behavior of some traders in the market. In 2012, chemical plants gradually changed their sales strategy by shifting supply to the factory plate and shipping raw materials directly to the manufacturers, in order to reduce circulation in the market. In the second half, the effectiveness is gradually shown. It not only standardizes the way of market trade, but also gradually grasped the trade initiative, and had a greater right to speak on market pricing.

 

In 2013, chemical plants will again limit production and grasp market information timely to guarantee market price based on operational efficiency. The ex-factory price will be close to the market, and will be more indicative to the market price. Given that the production cost has accumulated a larger rise in late 2012 and will continue to surge, based on cost considerations, ex-factory price at the beginning of the year will rise significantly. After the overhauls of monomer devices, supply of raw materials may stabilize.

Forecast of Plastics Market in 2013

Figure 6: The graph of the trend of spot price quote of a ABS, GPPS & HOMO PP market (Jan 2008 – Dec 2012)

 

SM（Styrene）approaches to the historical high of USD1710. GPPS surged significantly.

Source: HK Traders

 

Table 6: Volatility of plastics raw materials (2012)

From 2008 to 2012, the price trends of GPPS, ABS and HOMO PP have shown certain regularities. As mentioned in the monthly report (34) in December 2012, SM continued to rise in the second half of 2012 and GPPS rose greatly. In December, the difference between the price trend of GPPS and the HOMO PP curve, which is of a close price trend, gradually increased.

 

Figure 7: The Price Trend of SM and C3 (Jan 2010 – Dec 2012)

 

Asian SM plants overhaul more, and there is a good market demand in the United States. Asian supply shifts to the USA, spot supply is tight.

C3 increases potentially

SM: US$1714/ton C3: US$1220/ton

SM: US$1338/ton C3: US$1185/ton

SM: US$964/ton C3: US$989/ton

Source: HK Traders

The supply of BZ (pure benzene) in Asia, one of the SM synthetic monomer, shifts to the US due to short supply in US. The market price once went up. The C3 trend is relatively more stable. However, being a peak season for overhauls of monomer devices, the limited supply will push the prices of SM and C3 up easily. When the overhauls in the first quarter end, SM may alleviate at its high level. For C3, as supply increases, price may rise steadily until the second quarter.

 

Under the high price of synthetic monomer SM, GPPS and HIPS go up. From July 2012, SM has been rising. Chemical plants sold more monomers and decreased raw materials production. It is hard for the price to drop before March 2013. After gradually entering the peak season of production, demand will release gradually. There is a potential new wave of rise for the market prices of GPPS and HIPS.

 

At the same time, on consideration of cost and under the perquisite of being replaceable, manufacturers will replace GPPS with a more price competitive at the moment PP. The release of PP demand is stimulated to some extent. Also, the traditional peak season for the household product industry will begin in March 2013. The demand rise can push the price of PP up easily.

 

Figure 8: The Price Trend of AN and BD (Jan 2010 – Dec 2012)

 

The highest point corresponding to WTI is USD 102.83. Supply of AN was intense due to overhauls

There was an earthquake in Japan in March. Some devices stopped operations accidentally. The price of BD went up.

The highest point corresponding to WTI is USD102.55. And AN in US rose significantly toUSD$125

AN、BD rise potentially

AN: US$1665/ton BD: US$1470/ton

AN: US$1800/ton BD: US$1753/ton

Besides the impact of SM, ABS is also influenced by AN (acrylonitrile) and BD (butadiene). The two monomers accumulate a larger decline in the second half of 2012. They rebound from the lows in December. In 2013, both AN and BD will continue to experience the rising stage. Chemical plants have cost pressure but not inventory pressure. The ex-factory price may move up easily. In May 2013, the price tends to be stable in general. The market price of ABS may rise further when entering the third quarter, the traditional peak season.

 

 

 

 

 

 

 

 

 

 

Statistical Results of Corporate Business Environment Survey in 2012

 

China's exports in 2012 increased 7.9% over the past year. It rose steadily. Currently, European and American countries are still the main export markets for Chinese manufacturing enterprises. Lack of external demand is the biggest pressure the enterprises facing. The increasing labor cost is driving enterprises to transform and upgrade. In terms of expectations on 2013, most enterprises are relatively optimistic, particularly for the industries of lighting, appliances, electronics etc.

 

Also, in 2012, China's PMI was 50.6%, being over the line ups and downs for three consecutive months, laying a good start for the economic operation in 2013. In order to understand the enterprises’ operating conditions and their outlook for 2013, in November 2012, Sunta conducted a questionnaire survey. This is the first research on business environment and strategy targeting at enterprises for the company.

 

 

 

Figure 1: Major reasons corresponding to the business growth of enterprises in 2012

 

Among the responding enterprises, 20.25% said that their business grew in 2012, with product quality being the critical factor for them to succeed. Also, 35% claimed that their businesses reduced. The specific reasons are analyzed in Figure 2.

 

Figure 2: Corresponding reasons for enterprises to have their businesses reduced in 2012

 

 

Insufficient order is the major reason for enterprises to have their business reduced. Also, rising labour cost and RMB appreciation also influenced greatly. Among the factors influencing business of enterprises, 7.59% enterprises said there is no impact on their overall effectiveness.

Figure 3: Factors influencing the operation of enterprises in 2012

 

Numerous factors affect business of enterprises, while 7.59% of the enterprises said their corporate efficiency was affected by this, with the main reason being their products are of quality assurance. They are having a strong competitiveness. So, how do enterprises expect for 2013? How much impact will it have on the corporate growth rate when it is extended to corporate culture?

Figure 4: Expectations of orders by enterprises in 2013

 

As seen from the chart, enterprises have their optimism of number of orders improved in 2013, increased to 31.65% from 20.25% in 2012. Among enterprises having their orders increased, very high cohesion as the growth factors in the growth of the enterprise is as high as 48%. We can then know high cohesion plays a strong role in the corporate culture, thus pushing up the corporate performance.

 

Besides corporate culture, the internal mode of purchase of enterprises is also an important indicator to production control. The mode of purchase is influencing the operations of enterprises and imperceptibly influencing the productivity of enterprises.

 

Figure 5: Growth of enterprises corresponding to their mode of purchase

 

Among the enterprises having their number of orders increased, their mode of purchase is mainly within month, with stock on spot being the next. 12.5% are having stocks more than month. Comparing with big fluctuations in materials, it can also result in capital preservation. The actual situation, however, depends on the scale of the enterprise.

 

 

 

 

 

 

 

Figure 6: Recruitment situation corresponding to the scale of enterprises in 2012

 

In general, enterprises said that recruitment in 2012 was difficult. From the data we know that 70.89 enterprises were having difficulties in recruitment. Enterprises of different scales said that there were some difficulties involved in recruitment. However, large enterprises were easier to recruit people when comparing with small and medium enterprises.

 

After the above analysis of the overall situation of the industry, below is the specific analysis and comparison of the toy, home appliance, electronics and household product industries.

The toy industry

Being a labor-intensive industry, the toy industry is vulnerable to external market shocks. Also, rise in the cost of domestic raw materials and labor increased the cost pressure of enterprises easily. In the first half of the year, exports of Guangdong Province to the European and American toys were poor. But exports to the EU and US in the third quarter have recovered gradually, increasing from the year-on-year negative growth of 41% and 26% to 31% and 14%. However, exports to Japan was influenced by the Diaoyu Islands incident and decreased from the first half of the year-on-year growth of 31% to 26% in the third quarter. Exports to ASEAN, Latin America and Russia continued to maintain good growth.

 

Figure 7: Number of orders received/product sales in 2012 for the toy industry

 

16.67% of the toy companies said there was a growth in orders in 2012, with improvement in product quality and product innovation design accounted for half of the reasons respectively. So, in 2013, how will enterprises do to improve the growth rate of orders?

 

Figure 8: Enterprises’ expectation of orders in 2013 for the toy industry

 

According to the questionnaire, 45.83% of the enterprises responded that they expect the number of orders will grow in 2013, apparently higher than that in 2012. Also, they have a clearer direction in developing emerging markets. The market prospect is becoming optimistic.

The home appliance industry

The home appliance industry is generally stable in 2012. 33.33% of enterprises said that their orders have decreased, while 16.67% of them said that their orders have increased.

 

Figure 9: Number of orders received/product sales in 2012 for the home appliance industry

 

 

Figure 10: Order situation corresponding to the main market percentage for the household appliance industry

 

50% of the enterprises expected their orders to remain stable for 2013. 33.33% said orders will grow. Reversing the decrease in percentage for the previous year, the situation is more optimistic. For the future main markets, China, and Europe are about the same and the United States accounted for a larger proportion. For the US and Europe, the two major export area of Chinese’s exports, the US economy is developing steadily, while Europe is recovering slowly. With a good external demand, China's exports of household appliances may significantly improve.

Electronics Industry

In 2012, China's import and export of electronic products showed a slight growth with an overall growth of 5.1%. Exports rose by 5.6%, accounting for 34.1% of the exports of the country's foreign trade. 2013 will be the critical year of the national implementation of the "12^th Five-Year Development Plan”. Driven by the country's rapid development of emerging electronic industries and the policies that continuous upgrade and transform the traditional industries, scopes of new energy, new audio-visual equipment etc will bring a very large market for the electronics industry.

Figure 11: Number of orders received/product sales in 2012 for the electronics industry

 

 

 

Figure 12: The market spread of the electronics industry

 

The electronics industry is highly dependent on external demand. The market is mainly in United States and Europe. Overseas orders will rise following the economic recovery. In 2013, the growth rate of the electronics enterprises is more likely to increase.

Household appliance industry

Being the main production base of the global home appliance industry, China is getting rid of excessive dependence on OEM export. This mode has gradually drawn attention from enterprises. In 2013, the home appliance industry faces complicated situations like withdrawals of policies, costs remaining high and stagnant economic development in Europe and US. There are both potential risks and opportunities in the exports market.

Figure 13: Number of orders received/product sales in 2012 for the home appliance industry

 

40% of household appliance enterprises said they experienced growth in 2012. In terms of product quality and the ability of innovative design, there is a balanced development with an increasing in competitiveness. The major proportion of the mode of operation of enterprises is also gradually changing.

Figure: Major operation mode of home appliance industry

 

On the basis of OEM, household appliance enterprises also increased OEM. Brand building, research and development of innovative products and new consumer piping layout have become important measures for household appliance enterprises to expand overseas.

In 2013, driven by policies like new urban - rural development, the demand for household appliances in the country will remain strong. As consumers demand more for the functions of household appliances, its technology continues to advance. Small household appliances become the mainstream of consumption. The prospect of exports is good. The household appliance market in 2013 is worth expectations.

 

From above data, despite a year of hardships and difficulties in 2012, enterprises still managed to win in steadiness. Those enterprises share common features like innovative designs, brand building, improvement of product quality and the development of emerging markets. In terms of purchasing, everybody thinks a good purchasing strategy is of paramount importance. The strategy is closed related to the cost of plants, production operations, delivery and cash flow. Therefore, plants must have one or more trustworthy suppliers. Regarding the loss of workers, cohesion becomes a major element, with its emphasis on a good corporate culture. During the exchanges with enterprises, it is discovered that they have the same characteristics to construct the basis of the corporate culture through learning and communication.

 

We want to hereby deeply thank the customers for provide the above information so that we are able to complete this report. I wish you a thriving business! Plenty of money! Good health! Wishes come true! Advance to the next level in the Year of Snake!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix 1: Asian Chemical Plant Device Events in 2013

Ethylene device events

Area	Company	Event	Time	Product affected	Production capacity (Ten thousand tons/year)
Thailand	PTT	Scheduled overhaul	July 2013	Ethylene	51.5

Pure Benzene device events

Styrene device events

Area	Company	Event	Time	Product affected	Production capacity (Ten thousand tons/year)
Indonesia	SMI	Scheduled overhaul	March 2013	Styrene	34
Indonesia	Sinopec	Scheduled overhaul	March 2013	Styrene	24
Saudi Arabia	Saudi Sinopec	Scheduled overhaul	March 2013	Styrene	58
Saudi Arabia	SADA	Scheduled overhaul	March 2013	Styrene	174
Saudi Arabia	Jubail Chevron	Scheduled overhaul	February 2013	Styrene	77.7
Kuwait	Kuwait Sinopec	Scheduled overhaul	January – February 2013	Styrene	45
Kuwait	Kuwait Sinopec	Scheduled overhaul	March 2013	Styrene	122.7
Thailand	Sinopec	Scheduled overhaul	February 2013	Styrene	30

 

Propylene device events

Acrylonitrile device events

 

Butadiene device events

 

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