Companies behind the crackers due on-stream over the next four years emphasise the low-carbon output. The planned new plant also have excellent economies of scale
Asian Chemical Connections
Coming to terms with the new China is essential for sensible forecasting
Even our base case sees global PE capacity in excess of de</mand at 22m tonnes in 2023 compared with a 10m tonnes/year annual average in 2000-2022. We forecast this year’s global operating rate at 79% versus the average annual 2000-2022 operating rate of 86%. Downside One would see 28m tonnes of excess capacity and a global operating rate of 77%; Downside Two would be 30m tonnes and 76% respectively.
China polyolefins in 2023: Demand and supply workshops crucial
This year is a great deal harder to predict than 2022,, hence my latest outlook for China’s PP demand (see the chart below), which includes the two extremes of our ICIS base case for 6% growth versus my worst-case downside of minus 5%.
China HDPE 2023 demand and net import forecasts
Scenario 1 for next year assumes that China successfully transitions from its zero-COVID policies. Consumer confidence comes roaring back. Demand grows by 4% year-on-year to a market of 17.6m tonnes.
Scenario 2 assumes that high infection rates and lack of healthcare resources keep consumer confidence depressed but that the global economy recovers, supporting China’s exports. Growth is minus 2%, leaving demand at 6.6m tonnes.
The worst-case outcome is Scenario 3 where the impact of zero-COVID continues, and the global economy gets weaker. Consumption falls by 4% to 16.1m tonnes.
Europe, re-globalisation of PE prices and the challenges for 2023
AGAIN, PLEASE DON’T SAY I didn’t warn you. The chart below is an example of how PE prices have started to re-globalise. as I said they would when they began to de-globalise from March 2021 onwards.
What applies to the declining polyethylene (PE) price differentials between Europe and China applies to all the other countries and regions versus China. The pattern has been the same in polypropylene (PP) over recent months.
China PP exports decline but the reason is hardly cause for cheer
In November 2021, the premium for overseas PP injection grade prices over prices in China reached a historic peak of $408/tonne. But in 1-18 November 2022, the premium was $113/tonne. Premiums have fallen in every month since April this year, resulting in a decline in China exports.
China’s real estate rescue and zero-COVID tinkering will make little difference
China’s real estate rescue only involves shoring-up lenders. The property bubble will not and cannot be reflated. Most of the zero-COVID rules remain in place, and will likely stay in place well into 2023
China’s PP exports decline, but this is only a temporary reprieve for the other exporters
The January-September data suggested full-year China PP exports to these top ten destinations 75,543 tonnes fewer than the January-August numbers. And the January-September numbers implied total 2021 China exports to all destinations of 1.47m tonnes compared with January-August that indicated 1.58m tonnes.
Overseas HDPE price premiums over China remain at historic highs, but maybe for not much longer
HDPE film grade price premiums for selected countries and regions over China recovered in September and October of this year. In 2020, premiums averaged just $36/tonne compared with $248/tonne in January 2021-October 2022.
China chemicals growth and the 20th Communist Party Congress
China’s share of global demand growth in the seven big resins jumped to an astonishing 67% in 2002-2021. Northeast Asia ex-China’s share of demand fell to minus 1% with Europe and North America worth just 4% and 2% of growth respectively. The chemicals world had become dangerously lopsided.