At some point, polyolefins exporters to China and the local producers will regain pricing power. This will become apparent from a widening of spreads as economic activity returns to normal. It really is as simple as this. So, you need our data and analysis.
Asian Chemical Connections
EFFICIENT SUPPLY CHAINS were something that we used to take for granted. They hummed away in the background, making petrochemicals just one of many globalised industries where products and services flowed almost seamlessly across borders. We didn’t have to think about supply chains because they worked so well.
Scenario 1, the ICIS Base Case, for China’s ethylene equivalent demand, sees growth at 9% in 2022 over last year. Scenario 2 involves 4.5% and Scenario 3, minus 3%.
REGULAR readers of the blog will know that I first highlighted the big polyolefins market divergence in April 2021. Back then, I said that:
Asia and Middle East producers needed to sell more to Europe.
Buyers should secure more resin supplies from Asia.
Instead of demand for the nine polymers growing by 7m tonnes in 2022 under our base cases, my downsides see consumption falling by 6m tonnes.
Every tonne you don’t produce, when you correctly assess that the demand isn’t there in a particular market, will be important in preserving cashflow. Cashflow could once again be king, as it was just during the 2008-2009 Global Financial Crisis; and every tonne that you do produce, when you accurately assess that demand is there will, of course, support your revenues.
The ICIS Supply & Demand Base Case growth for Eurozone and UK PE demand in 2022 over last year is 1%. Downside 1 assumes consumption will contract by 4% and Downside 2 by 7%.
SUPPLY-CHAIN problems continue to disrupt the global chemicals and polymer industries more than two years since the pandemic began.
Right now, the centre of attention of supply-chain anxiety is China.
China’s polyethylene (PE) demand in 2022 could fall by 3% over last year. Net imports may be as much as 3.9m tonnes lower
US PE exports could be restricted in 2022 by local logistics challenges as China’s imports decline as its economy suffers a recession. The centre of attention for Asian and Middle exporters may therefore be Europe.