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.
Asian Chemical Connections
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 LLDPE: New demand and net import outlook for 2023
China’s LLDPE demand in 2023 could either grow by 3% or contract by as much as 6%, depending on whether or not China successfully exits zero-COVID
Why European chemicals can emerge from this crisis as a winner
IT REALLY ISN’T doom and gloom if you take the longer-term view. Instead, for the chemical companies with the right strategies, the opportunities to build new sustainable business models are huge. The winners will make an awful lot of money while also doing the right things for humanity and our natural environment.
China PP demand and net import outlook for 2023
China[s PP demand growth in 2023 could be as low as minus 3% as it swings into a 2.6m tonnes net export position from this year’s likely net imports of around 3.4m tonnes.
China’s long-term GDP growth risks and polymers demand
Cumulative downside demand in the above chart would total 5bn – 91m tonnes lower than our base case.
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.
Naphtha markets underline why “Micawberism” is not the answer
The January-September 2022 multiple of BFOE crude prices per barrel over CFR Japan naphtha prices per tonne averaged just 7.9. The lowest multiple so far this year was 6.9 in August. The January-September 2022 average was the lowest annual average since our naphtha price assessments began in March 1990.
China’s dominance of global polymer demand delivered huge global growth. But what now?
China accounted for 33% of global growth in the seven major synthetic resins between 1990 and 2001. But this jumped to 63% in 2002-2021. In distant second place during both these periods was the Asia and Pacific region at 15% and 17% respectively.
This is the first significant chemicals downcycle for many years
Every tonne of polymer you decide not to produce because there isn’t a viable market will save vital revenues – especially as feedstock costs will remain very volatile. Every tonne of polymer you do produce because the market works will earn you crucial money at a time of declining overall sales.