China＇s Plastic Industry Will Achieve Greater Development

Written by Xu Gaodong and translated by Xin Xue

　　In recent years, along with the rapid development of real estate industry, building materials industry grows quickly. Plastic materials industry continues to grow rapidly as the state is advocating environmental-friendly building materials. Besides, the state＇s increased investment in infrastructure also significantly contributes to the growth of plastic building materials. Plastic building materials will become the new hot spots of consumption and economic growth point. The variety of plastic building products is becoming serialized, assorted and standardized with the expanding demand of all kinds of plastic pipes, windows and doors, high polymer waterproof materials, decoration materials, insulation materials and other plastic building products. Simultaneously, China＇s plastic building materials industry has been accelerating the pace of R&D, popularization and application. Moreover, the production scale is expanding continuously and the technology level is improved steadily. In particular, plastic profile and tubing material have already been the mature and stable building material variety. For the moment, China has become an advanced international great power for plastic production. Despite of the global financial crisis, China＇s plastic building materials are still expanding steadily, which on the one hand shows that plastic has become one of the indispensable needs of the times, on the other hand proves that China＇s plastic industry is mature, solid-based and owns a strong capability of anti-risk and self-recovery.

　　With regard to the development status of plastic industry in the first half year, according to "A study for the economic performance and market development of China＇s plastic industry in the first half year of 2009" jointly issued by China Light Industry Information Center, China Plastics Processing Industry Association and Dalian Commodity Exchange, the whole industry had been running smoothly with a steady growth of production and continuously raised rate of production&marketing. Moreover, imports & exports picked up growth and corporate profitability had recovered. Hereby, they forecast that the industry will be further developing healthily and achieve an increasing rate of around 10% in the second half year.

　　The following information from National Bureau of Stalistics also displayed that plastic industry had began to pick up growth in the first half year: In May, 2009, there are 18,900 above-scale enterprises engaging in plastic industry nationwide, most of which are distributed in coastal areas like Guangdong, Zhejiang, Jiangsu, Shandong and Shanghai etc. Above-scale enterprises in the above five districts account for 83.92% of the total number in the whole country. With scale profitability, strong anti-risk ability and good self-recovery capability, they were able to stepped out of the dilemma quickly and lead the whole plastic industry to get through the crisis in just a few months. It is well proved by the effectiveness data of plastic industry. From January to May, the accumulated industrial output value(current price) plastic industry had achieved is 370.941 billion yuan(RMB, same below), increasing by 7.5% compared to the previous year, in which, the industry sales output value totaled 370.941 billion yuan, growing by 6.5% and accounting for 9.98% of the sales output value of national light industry. Meanwhile, the monthly figure was also a steady growth. From January to May, the total plastic output was 16,093,300 tons, rising by 6.23%. Except that the output of January was lower than the level of the previous year, the other months all showed good growth momentum compared with the same period of the year 2007 and 2008. Along with the improvement of domestic economic situation, the effectiveness level of plastic industry had also recovered a little. The monitoring results of some key light industry enterprises displayed that the effectiveness level of key enterprises had stepped out of the depressed state of January and showed a steady development momentum at the beginning of the second half year of 2009. In terms of the development status of the second half year, the author is going to illustrate it by a concreter example. LLDPE is a common plastic and owns a great consumption in the market. Through analysis of its supply and demand, we can learn the developing trend of plastic industry in the second half year better.

　　LLDPE is mainly used in areas like packaging film, plastic sheeting for farm use, wire, cable, tube and coating products etc. According to the business consulting forecast of KPMG International, till the year 2012, Middle East will produce 33 million tons ethylene as well as 30 million polyethylene&polypropylene every year. The huge markets of Middle East will provide us a good opportunity of exporting plastics. Financial crisis caused the change of consumption structure. From 2008 to 2010, the global demand for polyolefins is expected to decline 19 million tons. Nonetheless, the crisis didn＇t have a great impact on our plastic sales market due to our large domestic market and strong self-consumption ability. Moreover, the sharp decline in demand for polyethylene mainly concentrated in durable goods industries, whereas the demand for industrial and consumption products in packaging industry was less affected, namely, the crisis had little impact on low-density polyethylene and linear polyethylene (LLDPE) markets. It is necessary for us to know that as an important industrial raw material LLDPE is extensively used in the fields of agricultural film and packaging film, which account for more than 80% of the total LLDPE consumption. The seasonal change of agricultural consumption causes the price of LLDPE to take on certain cyclical characteristics.

　　In April and May, the production of LLDPE is in depression and its price is low. However, from June to September, the market demand for LLDPE surges and its price is naturally going up. Although from October, the market demand shrinks, the price won＇t decline sharply. Instead, it will go through a period of adjustment and cushioning and drop slowly in November. But in December, the production material preparation phase will come and then the price of LLDPE will go up again. Through the above analysis, we understand that the price of LLDPE is basically increasing in the whole second half year. LLDPE is the principal consumption plastic variety, thus its good development momentum will provide impetus to the fast growth of whole plastic industry in the second half year.

　　Besides, the "two sessions" held in the first half year pointed out the development direction for plastic industry and provided an ideological guidance and policy support to the further development of the industry. Actually, several days before the "two sessions", the ＥＸＥＣutive meeting of State Council had passed in principle the regulation and revitalization plans of the ten important industries, that is, automobile,steel, textile, equipment manufacturing, shipbuilding, electronics and information, petrochemical, light industry, non-ferrous metals and logistics. This revitalization plan will significantly promote the domestic economic development. And it also provides a rare development opportunity for plastic industry since plastic industry is closely related to these ten industries. Any plastic enterprises grasping this chance will get rid of the negative impact of the crisis and gain great development. In fact, a lot of enterprises had already seized the opportunity and achieved significant benefits. For example, Wuhan Plastics had entered automobile and logistics industry and achieved a great success. Moreover, other plastic enterprises which are good at grasping chances have realized quick growth in the first half year and taken on a stronger rising momentum in the second half year.

　　After studying the spirit of "two sessions", we find that rural areas are the main "battle field" of expanding domestic demand for plastics. The demand of rural market is far from saturation, so the initiation of rural consumption will provide a great impetus to the economy. Last year, after "two sessions", the relevant state departments expanded investment demand through strengthening the construction of infrastructure, ecological environment and urbanization in rural areas. At the same time, they expanded consumption demand by increasing investment in people＇s livelihood and stabilizing the employment and income of urban and rural residents. Thus a virtuous circle was formed. Both the policies promoting rural economic consumption and the subsidy policies for rural consumable like "home appliance to the countryside" will further accelerate the recovery pace of plastic industry. Obviously, the urbanization of rural areas will inevitably spur the consumption of plastic tubes and building materials, and the policy of "home appliance to the countryside" will stimulate the sales of plastic parts.

　　According to the informed sources, after the "two sessions", a concreter economy-stimulating plans will be introduced. The plans will bring about recovery opportunities to plastic industry, whether they are about expanding domestic demand, or increasing employment, or promote people＇s livelihood.

　　Seen from its development situation, plastic industry is able to stand out from the crisis and to gain further development by taking full advantage of its existing comprehensive stengths, the national policy supports and the valuable development opportunities. Therefore, we have full reasons to believe that plastic industry has the ability and condition to grow rapidly in the second half year and to achieve greater development in the future.

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