China CFR PE price spreads hit new record low in 2024
Asian Chemical Connections
So far in 2024, despite supply tighter than it was in December last year, the average per tonne CFR China PE price spread over CFR Japan naphtha costs has fallen to its lowest annual level since we began our price assessments way back in 1993. 2022 and 2023 were the previous record lows.
The blue line in the above chart involves annual average capacity growing at just 800,000 tonnes/year in each of the years between 2024 and 2030. This is versus our base case assumption of 7m tonnes/year of capacity growth during each of the years.
I think that China’s polyethylene (PE) demand growth averaged 2% across the three grades in 2023. I see this year’s growth at between 1-3%, and at the same levels up until 2030.
A petrochemicals world dominated by Supermajors, especially those running COTC plants, or one where greater regional cooperation (more on this in later posts) and increased protectionism allow older, smaller and less carbon efficient plants to survive.
SHORT-TERM tactics should involve maximising returns within regions along with a greater focus on exports anywhere in the world
You might think it impossible for China to reach complete self-sufficiency in PE, PP, EG and PX. History suggests otherwise.
The developing world outside China cannot repeat China’s economic growth model because of climate change, ageing populations in the West and sustainability
Environmental, social and political factors – along with integration into upstream petrochemicals – have held back plant closures. Now, things seems very different.
There is a big new wave of lower-carbon and very advantaged cracker projects on the way, including Saudi Aramco’s crude-oil-to-chemicals investments.