Prices for synthetic rubber and fibers will probably keep rising due to a supply shortage while other chemical products will become cheaper in the fourth quarter, the National Development and Reform Commission (NDRC) said yesterday.

Cotton output is expected to reach 5.7 million tons in the country this year and the demand is about 9.4 million tons, the top economic planning body said. That will spur demand for products like chemical fibers used as a substitute for cotton.

Also, chemical products such as Neoprene, which can be used to replace rubber to make products such as tires, will be in heavy demand. Natural rubber has been in short supply since the third quarter and demand is rising, the commission said.

However, most other chemical products prices will drop moderately in the last quarter, the planner said. It cited cheaper energy and raw material prices, excessive production capacity of some products, as well as a drop in crude rates on global markets.

Output of ethylene increased 33.5 percent in August while production of plastic resin rose 28.8 percent, both faster than the previous month, the commission said.

"Over production will dampen the market balance and then cause pressure on enterprises," it said. Chemical products provide higher profit margins compared to refining oil.

For example, Shanghai Petrochemical Co, China's biggest ethylene maker, said gross profit margins for synthetic fibers and plastic resin were 11.97 percent and 20.50 percent respectively for the first three quarters.

(Shanghai Daily November 16, 2005)