China has been the main source of chemical and polymer demand growth over the past 2 years. But newly released trade data suggests its import volume on core products such as polyethylene may now be reducing, as more domestic capacity comes online. Equally, Asian producers, and the USA, face strong competition from low-cost Middle East exporters.
Trade flows are extremely valuable real-time indicators of market developments. The chart above, based on data from the leading provider, Global Trade Information Services, shows how China's imports of polyethylene have developed since 2008:
• Total import volume jumped 72% in 2009 to 5.2 million tonnes (orange column, right hand side), as the lending boom combined with restocking. But it then fell 6% to 4.88MT in 2010, as China's own domestic capacity increased.
• The Middle East (green line) has nearly doubled its market share from 20% to 37% between 2008-10, even though volumes were constrained by start-up delays, and feedstock shortages caused by OPEC oil quotas.
• The main 'winner' has been Iran, which supplied 700KT in 2010, vs just 35KT in 2008. But Saudi has doubled volumes to 575KT, whilst UAE, Kuwait and Qatar have all increased volumes significantly.
• North East Asia (blue line) saw its share fall from 36% to 28% between 2008-10, with its 2010 volume down 280KT in 2010 vs 2009. S Korea lost 170KT of exports last year, whilst Taiwan lost 50KT and Japan lost 60KT.
• South East Asia's (red line) share fell from 22% to 14% between 2008-10, with total exports down 50KT vs 2009. Malaysia/Singapore each lost 25KT of exports, whilst Thailand/Indonesia/Philippines were stable.
• The USA's (purple line) share slipped from 10% to 7% between 2008-10, whilst its volumes were down 250Kt in 2010 vs 2009.
• W Europe (light blue) and Russia (orange) both grew market share marginally between 2008-10, but whilst Germany's volumes was stable in 2010 vs 2009 at 95KT, Russia's volume dropped from 240KT to 140KT.
The blog's IeC colleague, Bob Townsend, is an expert in this area. And he suggests import volume will fall further over the next few years, as China increases capacity. He expects the Middle East to remain very competitive, given its advantaged feedstock and crude oil supply position with China.
This will put increasing pressure on NEA and SEA producers, just as many of them are bringing on new capacity. This could well destabilise other regional markets, if these producers try to export outside Asia to keep their plants filled.