THE LATEST DATA on linear low-density polyethylene (LLDPE) China CFR (cost & freight) pricing spreads over CFR Japan naphtha costs underlines the evidence from the other grades of polyolefins, that China is a long way from a full economic recovery.
Asian Chemical Connections
CHIINA’S LDPE spreads over naphtha feedstock costs have held up very well this. But this doesn’t mean to say that demand is good. Chinese demand could fall by as much as 8% in 2022.
Comparative PE and PP pricing data between Vietnam and southeast asia – and the “spreads” numbers between China PE and PP prices and naphtha costs – suggest the China economy has yet to recover.
High-density polyethylene (HDPE) demand in the developing world in 2023 could contract by 300,000 tonnes, rather than, as in our base case, grow by 800,000 tonnes because of the food crisis.
Assuming all the other regions grew as under our base case, global growth would be 2% in 2023 rather than our base case of 4%.
RECOVERY? WHAT RECOVERY? Some market players are talking about a rebound in the Chinese economy, and, therefore, polyolefins demand, but the critically important spreads data continue to tell a different story. Nothing has changed from last week.
January-April 2022 data point towards China’s polyethylene demand for the full year declining by 2% over 2021.
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.
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.
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.
THERE IS NOT MUCH point in carrying out economic stimulus if people can’t spend the extra money. This is the dilemma China faces as it maintains its Zero-COVID policy that it is now affecting some 400m citizens. This makes all the talk in recent weeks of a stimulus-led economic turnaround largely irrelevant.