The ever-growing crude oil price is weighing on the Chinese plastics industry, but has not heavily affected those manufacturers with high technological added value, experts and enterprises said when attending the seventh China Plastics Exhibition.

"Our sales dropped by 20 per cent this year due to the soaring crude prices," Zhou Jun, marketing director of Shanghai Dadu Steel & Plastics Products, told China Daily.

As a Sino-Japan joint venture, Dadu mainly produces basic plastic materials such as PP and PE, and are thus more sensitive to the fluctuated crude oil price.

Sinochem Trading (Singapore) Co also saw downward sales in plastic products. "But the impact has not been so obvious," said Cui Ming, business manager of Sinochem Trading (Singapore). "When the crude oil price hovers around US$60, the influence on plastic products is bearable. But if the price tops US$70, the plastics sector will have a hard time."

However, for Kepital, a South Korean engineering plastics company, the rising oil prices have had almost no impact on their sales and the company enjoyed a 24 per cent growth in sales income in 2004.

Kepital exported 26,000 tons of special engineering plastics in China last year, accounting for 14 per cent of China's total imports.

"The strong growth should be attributed to our technology strengths," Edward Lim, manager of Asia Marketing unit of Kepital, told China Daily. "Since special engineering plastics are products with high added value, we don't suffer from the climbing oil prices."

But Kepital's profit margin has been squeezed by the strong growth of domestic engineering plastic producers such as Yun Tian Hua, a Yunnan-based company.

For foreign investors, the Chinese plastics sector is still an attractive one.

"We are excited about this booming market," said Wolf Koehler, manager of the German-based TER Hell Plastic GMBH, a large plastic distributor in Europe.

"As almost all of our customers are moving into China, we can't afford to lose this huge market." Koehler added. "In 2003, one injection moulding machine was sold every second in China."

Koehler believed that as the plastic industry chain has become more efficient due to the joining of refineries, basic plastic products are more fragile to oil price fluctuations.

(China Daily November 5, 2005)