Cheaper plastic resin, higher demand for plastic products

Plastic product manufacturers expect higher demand in second half

GEORGE TOWN: Plastic product manufacturers expect resin prices to drop further this month and stabilise in the second half of this year, stimulating the demand for plastic packaging materials and other products.

Tek Seng Holdings Bhd and SLP Resources Bhd expect resin prices to decline further this month.

Tek Seng executive chairman Loh Kok Beng said in an interview that polyvinyl chloride (PVC) resin was expected to drop to US$1,100 per tonne in July, compared to US$1,350 per tonne in May.

“The drop is timely as orders for our PVC flooring products will be coming in due to the approaching Hari Raya festive season.
More production lines: Ang says Thong Guan is installing four more production lines.

“We have orders in hand of about RM45mil to deliver till September to domestic and overseas customers in Indonesia, the Philippines, Middle-East and Africa.

“Our production output of PVC flooring products is expected to rise by 15% this year from about 50,000 tonnes in 2010,” Loh added.

SLP managing director Kelvin Khaw said the price of polyethylene resin (PE) was expected to decline further this month, as demand from China had dropped.

“Resin prices should stabilise in the second half and thereafter rise gradually in tandem with market forces.

“Sales had started to slow down in April as there was anticipation for the price of resin to come down.

“Therefore, some customers held back their orders. In May, our plastic packaging material sales picked up again due to restocking activities.

“Now that resin prices have come down, our selling prices will be adjusted accordingly and we expect more orders.

“Our margins will not be affected as we have efficient production control.

“As SLP buys its raw materials in greenback and sells the products in greenback, our margins are not affected, compared to those which buy raw materials in ringgit and sell in greenback,” Khaw said.

The price of PE resin hovers around US$1,250 per tonne, compared to US$1,340 in June.

It was highest in March, hitting US$1,500 per tonne.

Khaw said Japan was expected to start rebuilding its economy in the fourth quarter, which would increase its demand for plastic packaging materials.

“The domestic contribution to the group's revenue this year is expected to be 50%, while Japan will generate about 30%.

“Australia, New Zealand, and the rest of the world generate the remainder,” Khaw added.

For the first five months of 2011, SLP generated sales revenue of about RM70mil or some 10,000 tonnes of plastic packaging materials.

“We are on course to achieve an annual output of 30,000 tonnes for 2011,” he said.

Meanwhile, Thong Guan Industries Bhd, the largest exporter of plastic packaging materials to Japan, is injecting RM25mil to install four production lines in the third quarter of 2011 to increase output to more than 11,000 tonnes per month from the present 10,000 tonnes per month.

This year Thong Guan is targeting to produce more than 100,000 tonnes of plastic packaging materials, compared to 90,000 tonnes last year.

Group managing director Datuk Ang Poon Chuan said the expansion was to cater for demand for the group's stretch film products and PVC food wrappers.

“We expect some of our traditional markets in Australia to consolidate due to an expected slowdown in the economy.

“However, as the plastic resin price is coming down, we expect more orders for our products from the new markets that we are diversifying into.

“We have secured over RM30mil worth of orders for next month from our customers for plastic packaging materials,” he said.