This year is a great deal harder to predict than 2022,, hence my latest outlook for China’s PP demand (see the chart below), which includes the two extremes of our ICIS base case for 6% growth versus my worst-case downside of minus 5%.
Asian Chemical Connections
China PP exports decline but the reason is hardly cause for cheer
In November 2021, the premium for overseas PP injection grade prices over prices in China reached a historic peak of $408/tonne. But in 1-18 November 2022, the premium was $113/tonne. Premiums have fallen in every month since April this year, resulting in a decline in China exports.
China HDPE: 2023 demand and net import outlook
China’s HDPE in demand in 2023 could fall by as much as 4% over 2022. Next year’s net imports may slip to as low as 3.8m tonnes from around 5.7m tonnes in 2022.
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.
China PP spreads data continue to show no recovery, weakest market since at least 2003
UNTIL WE SEE a recovery in China PP-naphtha spreads during around a 12-month period to close to long-term annual averages, there will have been no complete rebound in the market. The spread so far this year at just $264/tonne is 41% lower than the previous lowest year of $447/tonne in 2012.
A perfect global PP storm: China’s collapsing demand and rising capacity
THIS IS A POLYPROYPENE ((PP) world being turned upside down. China has entered a period of lower growth with capacity additions so big that imports are collapsing as China also starts to substantially increase exports.