Risks for US petrochemicals grow as crucial trade talks resume

Business, China, Company Strategy, Economics, Olefins, Polyolefins, US

By John Richardson

THE ABOVE chart further underlines what is at stake for the US petrochemicals industry as the US and China tomorrow resume high level trade talks in an attempt to end their trade war.

The chart shows that if the US can export HDPE to China in 2019 and 2020, it will require a 16% share of total global net imports. But if it cannot ship any HDPE to China this rises to 34%.

China imposed 25% import tariffs on US HDPE in late August last year. The latest available US trade data for September-October 2018 shows US shipments to China, probably as a result of US producers attempting but failing to pass on the new duties to Chinese buyers.

A problem for the US is the sharp rise in its HDPE production that’s scheduled to take place in 2019 and 2020. The ICIS Supply and Demand Database estimates that US HDPE production will rise by 775,000 tonnes during those two years as local demand increases by 290,000 tonnes.

What could jeopardise the talks is this morning’s news of US Justice Department indictments against China telecoms giant, Huawei. Accusations include theft of trade secrets and promising bonuses to employees who collect confidential information from competitors. Formal charge have also been levied against Huawei CFO Meng Wanzhou, who the US wish to extradite from Canada.

Let’s hope the US and China can reach some kind of trade deal by the 2 March deadline, or at the very least agree to not further escalate their trade war whilst giving themselves a few more months to complete discussions.

This would provide some breathing space for the US and global PE industries, even if, as I suspect, any trade deal would only be paper thin. I believe that a deal would inevitably fall apart because of the big economic and geopolitical gulf between the US and China.

Now take a look at the above chart which shows what could happen if China decides to extend trade war duties to LDPE. If that were to lead to US inability to ship to China, the US would require no less than a 54% share of the remaining global net import as opposed to 22% if it can ship to China.

The scale of the US production increase in LDPE is also big versus local demand: In 2019-2020, we estimate that production will increase by 329,000 tonnes with local demand only 22,000 tonnes higher.

There are no indications that China will extend tariffs to LDPE. But in a scenario where the trade talks break down such an escalation cannot be ruled out.



The polyethylene world is now even more hooked on China


By John Richardson CHINA’S NET PE imports look likely to have risen by an aver...

Learn more

China slowdown threatens a million tonnes of lost styrene demand


By John Richardson CHINA’S apparent demand (*see note below) for styrene in 20...

Learn more
More posts
President Trump’s “better off without China” tweet not supported by the data

The opinions in this blog post are, as always, my own and do not reflect the views of ICIS   By...

How sustainability will upend the petrochemicals cost curve, creating new winners and losers

By John Richardson THE FUTURE I described on Wednesday, of declining petrochemicals and polymers dem...

How the Millennials and “less is more” are destroying petrochemicals demand

By John Richardson WE HAVE gone beyond the point of no return because of a major societal shift. Mil...

How we could all end up as losers from President Trump’s trade policies

The views below are my own, and, as always, do not express the opinion of ICIS By John Richardson RE...

President Trump’s tariff concession adds to uncertainties as we drift towards a bipolar world

The following opinions are my personal views, and, as always, do not express the views of ICIS By Jo...

China PE overstocking at above a million tonnes as Beijing struggles to boost economy

By John Richardson EVEN IF our base case growth rate* for PE in China in 2019 proves to be correct t...

China trade war duties on US LDPE “very likely” as global recession concerns grow

By John Richardson IT IS very likely that China will impose 25% additional imports duties on LDPE in...

US declaring China currency manipulator risks 10.8m tonnes of global petrochemicals demand

  By John Richardson BY PLAYING with fire President Trump has very likely set the forest on fir...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more