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Plastic on the decline, but product prices still up

Makers are keeping close tabs on spot and futures indexes, taking a wait-and-see approach before adjusting export quotes anew.

After peaking at 30 percent year-on-year growth in April, plastic costs are now falling, dragged down by weakening crude oil rates and the current volatility in the EU market. The difficult economic situation in Greece has made plastic futures buyers wary, resulting in lower prices. Despite this, China suppliers of plastic-based products show no sign of reducing quotes.

Plastic on the decline, but product prices still up
The China Plastic Spot Price Index released by the Zhejiang Plastic Online Trade Market shows plastic costs may be on the decline, but they are still up 14 percent year on year.

The China Plastic Spot Price Index, which averages international and domestic quotes for several types of plastic, declined 3 percent in May from the highest level in April. China Plastics Information Network analyst Zheng Yueyun believes prices will continue falling, at least through Q3 2010, because of a global oversupply of PE and PP.

While this has eased the cost pressure on manufacturers, many are still watching the changes closely. In the meantime, export quotes have been left at their current levels.

Companies producing low-value products had no choice but to raise prices when plastic skyrocketed in the first few months of 2010. This came especially since they were just beginning to recover from the global financial downturn and still needed to recoup losses.

Food-grade PP in April was 1,000 to 2,000 yuan ($146 to $292) higher per ton year on year. Suppliers of food containers, which are made mainly of PP, had to increase quotes 5 to 10 percent as a result. These have not gone down since then.

Higher PVC and PP rates also pushed file folder and bag factories to adjust prices 2 to 3 percent upward. These were passed on mostly to new clients as manufacturers were wary of charging existing buyers with higher quotes, especially with the keen competition in the industry.

Simply raising prices, however, was not possible in some sectors such as small plastic gifts and toys. With thousands of plants engaged in these lines, makers would rather absorb additional costs than lose orders. Those that were able to adjust quotes upgraded with additional functions or an enhanced design.

The situation was worse for companies that use engineered plastic in their products. The Zhejiang Plastic Online Trade Market price monitor indicated rates for various types of engineered plastic such as ABS and PC jumped 40 percent and back to predownturn levels. Plastic car rim cover manufacturers, including Zhejiang Huangyan Zhentian Plastic Mould Fty, had to implement a 10 to 15 percent price increase because of the higher outlay.

To cater to buyers with lower budgets, such businesses also released versions made from recycled ABS or PP, which is just one-third to half the cost of virgin plastic.

Note: This article "Plastic on the decline, but product prices still up" was originally published by Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.

All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.

Disclaimer: All product images are provided by the companies interviewed and are for reference purposes only. Those product images featuring products with trademarks, brand names or logos are not intended for sale. We, our affiliates, and our affiliates' respective directors, officers, employees, representatives, agents or contractors, do not accept and will not have any responsibility or liability for product images (or any part thereof) which infringe on any intellectual property or other rights of a third party.

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