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
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.
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.
In January-March 2022, the ICIS China production estimates plus the net import data from the China Customs department suggested that China’s full-year polypropylene (PP) demand growth would have been be 4%. But the January-April data for this year suggest almost zero growth over last year.
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%.
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.
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
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.
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.