Chemical Profile: Asia HDPE

23 May 2014 10:29  [Source: ICB]

USES

The major outlet for high density polyethylene (HDPE) is in blow-moulded products such as milk bottles, packaging containers, drums, car fuel tanks, toys and household goods.

Film and sheet are widely used in wrapping, refuse sacks, carrier bags and industrial liners. Injection-moulded products include crates, pallets, packaging containers, housewares and toys. Extrusion grades are used in pipes and conduit.

SUPPLY/DEMAND

Asia HDPEChina’s demand for PE resins, including HDPE grades, is expected to growth by 5-6% this year, amid tight credit and slowing economic growth. Chinese HDPE production has been focused on film, mono-filament and natural pipe grades in the first four months of the year, which registered double digit increases on a year-on-year basis.

China’s high density polyethylene (HDPE) film grade imports are expected to increase in the second half of the year. The increased quantity is expected to mainly come from Borouge in the United Arab Emirates (UAE) and Ilam Petrochemical in Iran. Borouge’s two new PE plants with a combined capacity of 1.08m tonnes/year expected to come on stream in the second half of the year will be producing HDPE film grades, the bulk of which is expected to be exported to China. Ilam Petrochemical is expected to start producing film grades at its 300,000 tonne/year HDPE plant later in the year, the bulk of which will be exported to China. The first cargo from Ilam Petrochemical arrived in China in May 2014, consisting of HDPE injection grades.

China’s HDPE injection grade import volumes are expected to be largely stable in the second half of the year. Kermanshah Petrochemical’s 300,000 tonne/year HDPE plant in Iran which came on stream in early 2013 is expected to be the main exporter of HDPE injection grades to China. Borouge is expected to supply injection bottle cap grades from its two new plants in the UAE. Ilam Petrochemical is expected to supply injection grades later this year too.

However, most of the HDPE injection imports in China in the second half of the year is likely to consist of injection grades with a melt index of more than ten, because the key HDPE injection grades producers in Iran are likely to switch to the high melt index grades for higher returns, compared with the low melt index grades (melt index less than ten). Iran’s Jam Petrochemical, a key exporter of HDPE grades to China, had refrained from making injection grades in the first half of the year as a result of poor margins. Jam Petrochemical is expected to switch its 300,000 tonne/year HDPE/linear low density PE (LLDPE) swing plant to produce LLDPE later this year for better margins. Kermanshah Petrochemical is expected to switch its HDPE plant to produce blow moulding grades in the second half of the year.

China’s HDPE blow moulding grade imports are expected to increase in the second half of the year, with the increased quantity mainly coming from the two plants in Saudi Arabia operated by Saudi Polymers. These two plants with a combined capacity of 1.1m tonnes/year were started up in the third quarter of 2012, and had achieved stable production since early 2014, market sources said.

China’s HDPE mono-filament import volumes are expected to remain small in the second half of the year, as most Middle East and Asian producers do not focus their production on this grade of resin.

The demand for the different grades of HDPE in southeast Asia is expected to be stable to weak in the second half of the year, as increased supply from the Middle East may dampen market sentiment. The ongoing political impasse in Thailand and the upcoming presidential election in Indonesia in July have created varying degrees of political uncertainty in these markets, and hence resin demand in these areas is expected to be slow. On regional supply, Thailand will continue to be a key exporter of HDPE film grades, while Chevron Phillips’ plant in Singapore will remain a key supplier of HDPE blow moulding grades to southeast Asia. The availability of HDPE pipe grade is expected to balance out amid the lacklustre demand, and flexibility of most HDPE producers to switch their productions to other HDPE grades.

PRICES

HDPE resin import prices in China were trading at an average of $1,483-1,620/tonne CFR China in the week ended 9 May, 2014. HDPE pipe grade black resins used to command at least $80/tonne premium over film grades in 2013, but the price spread has shrunk drastically since early this year, mainly due to a slowdown in the Chinese infrastructure sector and increased supply of HDPE 100 black resins from the Middle East. Imported HDPE 100 black resin was selling at a $55/tonne premium over HDPE film grade in the week ended 9 May, according to ICIS. HDPE film grade’s price premium over blow moulding and injection grades widened to about $58/tonne and $83/tonne in the week ended 9 May, as low domestic output supported the import prices of HDPE film grades.

Similarly in southeast Asia, HDPE 100 black resin’s premium over film grades has shrunk as a result of increased supply from the Middle East. In southeast Asia, the price gaps between HDPE film grades and the other HDPE grades, including blow moulding and injection grades, have also shrunk because of increased supply of film grades from the Middle East and southeast Asia, and relatively less supply of injection and blow moulding grades from the Middle East and Asian producers.

TECHNOLOGY

HDPE is produced by the catalytic polymerization of ethylene in either slurry (suspension) solution or gas-phase reactors. Some processes can switch to produce LLDPE. The choice of catalyst and/or the use of bimodal processes is used to modulate the quality of the output.

The development of metallocene catalysts also allows slurry-loop operators to enter the LLDPE sector.

Bimodal processes claim to produce resins competitive with those from metallocene.

OUTLOOK

The China and southeast Asia HDPE market outlook was uncertain, with many potential bullish and bearish factors at play. The slowing Chinese economy is a key bearish factor for the Asian market because when China is not importing resins, regional market sentiment will be hampered. Some of the emerging markets in southeast Asia, particularly Indonesia and the Philippines, are still showing strong demand but the demand in these markets are too small to be able to fill in the regional demand gap, if China’s import demand was to weaken further.


Author: Bee Lin Chow



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