The same FT article on the Q3 economic statistics said: “Property investment in the first nine months of the year was down by 9.1%, reflecting sector-wide debt defaults by developers and weak apartment sales. New housing starts have fallen by more than 20% so far this year compared with 2022.”

And even the moderately good news represented by the Q3 data should be taken with a pinch of salt. As the Financial Times highlighted in this 18 October article, stronger-than-expected year-on-year growth in GDP partly reflected the fact that in the third quarter of 2022, China was marooned in the doldrums of the zero-COVID lockdowns.

Packaging giant Berry Global Group Inc. has added to its portfolio F&S Tool, a specialized provider of high-output, high-efficiency hot-runner injection and high-volume compression molding applications.

We can measure the week-by-week progress of the PP industry towards full recovery by comparing spreads from January 2022 (when the downturn began) to the present with the long-term averages between 2003 and 2021.

There’s the rub for PP and other petrochemical products. Every year that growth disappoints in this fashion, the cumulative gap between earlier forecasts and today’s patterns will build.

Let’s imagine that the improved economic momentum continues until the end of the year and that final 2023 demand ends up growing by 3% – the top end of my range.

The combination of a vast selection of tooling with Berry Global’s regionally-based knowledge offers customers a competitive advantage by providing faster turnaround from start to finish and greater assurance that the molds will fit its production lines, said the company in the news release.

September retail sales grew by a healthy 5.5% on a year-on-year basis. But several commentators pointed out that double-digit growth in retail sales had been expected after the zero-COVID lockdowns ended.

How the above chart works is that I calculated average CFR China PP injection, block and random copolymer prices for January-August 2022 and January-August 2023.

Berry said this acquisition will further enhance its global tooling capabilities as well as bring proprietary technologies in the closures and bottles space, specifically targeting high-end growth markets.

The Informa Markets Engineering network of B2B media sites includes Design News, Battery Technology, Medical Device & Diagnostic Industry (MD+DI), Packaging Digest, PlasticsToday, and Powder & Bulk Solids.

On an annual basis, CFR China PP spreads so far this year are $1/tonne higher than their lowest level since our price assessments began in 2003 – which was in 2022.

Buy, plan and negotiate more effectively with 18-month price forecasts and analytics. Monitor cost pressures and identify early signs of production shifts.

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Then I multiplied these two numbers by the tonnes of imports reported by China’s from its major trading partners for these two eight-month periods, I next took the 2022 totals away from the 2023 totals.

This would still leave the market 1.9m tonnes smaller than if growth were 8%, which was the top end of the range of earlier assumptions.

As I, for example, wrote, referencing The Economist: “The magazine quoted the economic research firm, CRIC, which estimated that 2023 Golden Week year-on-year property sales fell by 79% and 57% year on year in Shanghai and Shenzhen respectively.”

But there were some sales winners as the next chart shows. They included Kazakhstan with its new PP plant that is supplying China via a new road link, the Russian Federation and Vietnam. As the links to the news articles on the slide below details, geopolitics is playing a role in this shift in trade flows.

Total losses among these exporters to China came to $769m tonnes in January-August 2023, again on a year-on-year basis, versus $755m in January-July.

This means that because our industry has got China so badly by overestimating the country’s growth, we have ended up with charts such as the one below.

MOST OF the commentary on China’s third quarter economic data, which was released earlier this week, was in my view spot on. It is at last being broadly recognised that while short-term growth has picked up slightly, the longer-term challenges make a return to the heady growth years of 2000-2021 pretty much impossible.

On an annual basis, as the next chart details, CFR China PP spreads so far this year are $1/tonne higher than their lowest level since our price assessments began in 2003 – which was in 2022.

Just about everyone is now talking about the impact on long-term growth of demographics, debt, geopolitics and the relocation of export-focused manufacturing away from China.

The self-described global leader in sustainable plastic packaging operates more than 11 tooling manufacturing locations across the world. With this acquisition, Berry’s customers will have access to a full suite of tooling capabilities, including injection, blow, compression, and thermoforming molds that can be integrated into their existing product orders.

PP block copolymer grade spreads would need to rebound by 118% to return to their long-term average and injection grade spreads would need to be 123% higher.

This tells us that South Korea’s sales to China were down by no less than $326m in January-August this year versus the same period in 2022. Singapore’s sales were down by $157m and even the feedstock-advantaged United Arab Emirates saw its sales slip by $119m on lower pricing and lower imports.

Search for individual chemicals, energy or fertilizers commodities to learn more about the pricing, news and analysis we offer.

How will we know if improved economic growth momentum has worked its way through to delivering better profitability for PP producers in China and those who export to China? It will be through spreads – the gap between resin prices and feedstock costs.

We also mustn’t forget the drag on growth from the end of the real-estate bubble, which I discussed in detail in my 17 October post.

The average spread between 7 July and 13 October 2023 was $231/tonne. This compares with $279/tonne between 6 January and 23 June.

When new polypropylene (PP) projects were being planned, the proponents of the projects assumed that China’s demand would expand by 6-8% per year for the next 20 years are more. Instead, growth at 1-3% seems to me more likely.

Before then, PP and other petrochemical capacities will need to be shut down and new projects cancelled or postponed in order to bring markets back into balance. The shutdowns and cancellations will have to be big.

How long will this process take? In my view, at least another two years, so we are at least two years away from recovery.

The chart below underlines the new direction of travel. The ICIS base case assumes 5% growth for this year whereas the annualised January-August data suggest that 1% is more likely.

“The integration of F&S Tool’s talented teams and market-leading innovation capabilities combined with Berry’s global operations reinforces the company’s commitment to providing customers across the globe with access to its industry-leading range of products in core markets while offering the benefits of local service and speed,” said Berry Global CEO Kevin Kwilinski in a prepared statement.

F&S Tool operates a 90,000-square-foot facility in Erie, PA, with 11 issued or pending patents. Just over 100 employees serve a broad spectrum of plastics manufacturers. Founded in 1983, F&S Tool cites packaging, medical, and closures as core applications.