China’s PE imports tumble as market slows, local output rises

Chemical companies

SHARE THIS STORY

China PE Mar15aaThe above chart is a major wake-up call for anyone who still believes that China will continue to import ever-increasing volumes of major commodities such as polyethylene (PE).  It suggests demand and import growth are now at much lower levels than in the past, and may even have begun to peak.

The chart shows cumulative volumes in January-February 2015 (red column), versus 2014 (green), based on trade data from Global Trade Information Services:

  • China’s overall demand has fallen 4% versus last year, whilst domestic production has risen 9%
  • As a result, imports have fallen 20%, hitting all major Regions
  • The Middle East is down 21%, NE Asia down 10%, NAFTA down 61%, Europe down 31%, and SE Asia was flat

There are a number of key messages that jump out from the data.

One key issue is the continuing increase in China’s own production.  This is in line with my discussion yesterday of Sinopec’s 2014 results, which confirmed once again that China’s refining and petrochemical industry operates without the need to make Western-style returns on its investment.

A second is that it confirms my concern last year that China’s PE imports were then being artificially inflated by the “collateral trade“.  This was a development in China’s shadow banking system, whereby imports of commodities such as PE, copper and iron ore were used as collateral for lending into the property sector*.

A third is confirmation, if confirmation were still needed, that China is unlikely to be very interested in taking additional imports from the planned US expansions.  Slowing demand growth, and rising domestic demand production, means that China simply doesn’t need to buy from the US any more.

Instead, it is clearly aiming to increase employment in relatively high-paying industries such as petrochemicals and polymers.  This neatly compensates for the loss of jobs in low-margin activities such as plastic film processing, and means that China retains most of the value-added..

This is clearly a difficult message for US producers.  But it is better to face reality today, that to commit large sums of money to build new capacity for which there is no market.

 

*  As described last June in my joint note with Polarwide of Hong Kong, Here today and gone tomorrow, a simple guide to China’s world of trade finance

 

 

PREVIOUS POST

Sinopec confirms move into China's New Normal economy

25/03/2015

Sinopec, China’s largest chemical company, has just published its operatin...

Learn more
NEXT POST

Economic impact of ageing populations is obvious, but ignored

27/03/2015

Too many policymakers, companies and investors are continuing to ignore the dra...

Learn more
More posts
Polyethylene’s crisis will create Winners and Losers
08/12/2019

Polyethylene markets (PE) are moving into a crisis, with margins in NE Asia already negative, as I h...

Read
Day of reckoning approaches for US polyethylene expansions, and the European industry
08/09/2019

Planning for future demand in petrochemicals and polymers used to be relatively easy during the Baby...

Read
Stormy weather ahead for chemicals
24/03/2019

Four serious challenges are on the horizon for the global petrochemical industry as I describe in my...

Read
Ethane price hikes, China tariffs, hit US PE producers as global market weakens
23/09/2018

Sadly, my July forecast that US-China tariffs could lead to a global polyethylene price war seems to...

Read
US ethylene prices near all-time lows as over-capacity arrives
13/05/2018

US ethylene spot prices are tumbling as the major new shale gas expansions come on line, as the char...

Read
World Aromatics Conference focuses on key industry challenges
04/11/2017

Our 16th World Aromatics and Derivatives conference takes place on Wednesday/Thursday in Amsterdam. ...

Read
Hurricane Harvey will turbocharge move to the circular economy
25/09/2017

300,000 homes and half a million cars have been destroyed by Hurricane Harvey.  And in terms of bus...

Read
Plastics demand is peaking as circular economy arrives
24/07/2017

The Stone Age didn’t end because we ran out of stones.  Similarly, coal is being left in the ...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more