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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 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.

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