See below the second week of the blog’s global price-comparison indexes, where I compare China with a selection of other countries and regions.
By John Richardson
THESE ARE STILL extraordinary times in global polyolefins markets. Although the great equalisation has begun as pricing in a big proportion of the rest of the world falls towards Chinese levels, price premiums over China remain historically very high. There are thus still strong opportunities for exporters to make good netbacks in markets other than China.
But, of course, because Chinese polyethylene (PE) and polypropylene (PP) demand growth is going to be negative this year as more local capacities are added, the extra netbacks gained in other markets won’t come close to replacing lost sales volumes in by far the world’s biggest market.
Nevertheless, exporters in Saudi Arabia, Abu Dhabi, Kuwait, Qatar, Iran, South Korea, Singapore and Thailand etc. need to keep a razor-like focus on the price differentials between China and other markets. Every strong netback on each tonne will be important in minimising losses as we head towards the bottom of this downcycle.
This is why I have launched weekly high-density PE (HDPE) film grade and PP injection grade indexes that compare price differences between China and a selected group of other countries and regions.
But the indexes only provide average price differences for a limited group of markets – and I am only examining two grades out of the many grades of PE and PP. The indexes also come without market insights from our pricing editors
If you don’t subscribe to our full set of global pricing benchmarks and /or need the support of our editors, contact me at john.richardson@icis;com.
HDPE price premiums edge down as Asian prices recover
The HDPE film grade price premium for India, Pakistan, Northwest Europe (NWE), Turkey, southeast Asia (SEA) and Vietnam over China fell to $161/tonne in September 2022, in the week to 23 September, compared with $165/tonne in the week 16 September
China prices rose by $13/tonne with SEA and Pakistan prices increasing by $25/tonne and $50/tonne respectively in the week to 23 September compared with the week to 16 September. India, Vietnam and Turkey prices were unchanged as NWE prices fell by $37/tonne.
The Asian price recoveries were said to be the result of tighter supply and the hope that Chinese pricing might have finally bottomed out. The key thing to watch, though, will be the spreads between China PE and PP prices and naphtha costs. As long as they remain where they are today – at their lowest levels in some cases since 1990 – there will be no recovery.
In Europe, demand was described as “stagnant” by our market editors. Although consumption in September was said to have recovered from the peak-holiday month of August, September consumption was still reported to be 10-20% below what had been expected.
Despite the steady decline in overseas HDPE price premiums over China since April 2022, longer-term data show that we still live in a de-globalised pricing world:
- The average HDPE price premium for the group of countries and regions over China between 1 January 2021 and 23 September 2022 was $251/tonne.
- This compared with just $36/tonne in 2020. This was before the deceleration of China’s economy combined with high container freight rates to leave oversupply trapped in Asia, as demand and supply balances also tightened in other countries and regions.
Here are the latest actual HDPE prices. Average overseas prices have been declining since April this year, closer to China levels.
PP premiums also slip due to moderate Asia price uptick
The PP injection grade price premium for India, Pakistan, NWE, Turkey, SEA and Vietnam over China declined to $147/tonne in September 2022, in the week to 23 September, compared with $154/tonne in the week to 16 September.
This happened as the idea also grained traction in Asian PP markets that Chinese pricing had bottomed out. Vietnam prices rose by $40/tonne, SEA prices increased by $25/tonne and China, India and Pakistan prices were all $10/tonne higher in the week to 23 September compared with 16 September.
But China PP spreads over naphtha feedstock costs remain at record lows. This tells us that a real recovery hasn’t happened yet.
Turkey PP injection prices remained unchanged. NWE Europe prices fell by $35/tonne on weak demand.
As with HDPE film grade, the longer-term data show we continue to live in a very divided PP injection grade world:
- The average PP price premium for the group of countries and regions over China between 1 January 2021 and 23 September 2022 was $307/tonne.
- This compared with just $36/tonne in 2020, before pricing in each in region became much less global.
Here are the actual PP prices. The chart again shows that average overseas prices have fallen closer to Chinese levels since April 2022.
Conclusion: Every dollar counts
To repeat, as this is so, business critical:
- Every tonne of PE and PP, and other chemicals and polymers, you decide not to produce because there isn’t a viable market will save you vital revenues.
- Every tonne you do produce because the market works will earn you crucial money at a time of declining overall sales.
Volatility between regions will remain off the charts as we head towards the bottom of this cycle. Saving or making money during the numerous mini troughs and peaks before markets bottom out will define your success or failure.
You can only do this with full access to historic pricing data, along with the analysis to go with the numbers.