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Updated to Q1 2021
China PE production volumes increased but import supply tightened. The US winter storm caused massive production outages and tightened US supply further in China. SE Asia supply was also generally tight because of delayed shipments due to container shortages and the absence of US cargoes while Middle East supply also tightened due to better netbacks to other regions.
China domestic demand slowed leading up to the Lunar New Year holidays but then recovered after the holidays as most downstream production increased, led by demand for packaging. SE Asia demand showed marginal improvement as COVID-19 vaccination efforts gained momentum but a lack of regional travel was still a drag on economic activities.
Supply was extremely tight in Q1, with some grades short. Low prices in global terms at the end of 2020 led to complacency, and by the time buyers came back to the market supply had tightened, on increased exports, fewer imports and reduced output. Supply of LDPE was particularly impacted, but all grades became tight as other regions provided better netbacks. Arbitrage opportunities were appearing by the end of Q1.
Demand was strong in Q1, following unexpectedly good demand at the end of 2020. Tight supply spurred some buyers to request more volumes than they needed, as they expected to procure only a portion of their request, and this led to some confusion over the true level of Q1 demand. Packaging remained robust, along with construction. Lockdowns throughout Europe were widely thought to have supported packaging demand.
Availability started poor and became weaker through the first quarter of 2021. Reduced allocations remained an issue throughout, as suppliers targeted better arbitrage opportunities. The sudden closure of large portions of US production, due to the snow storm in Texas, exacerbated the situation. This left normally predictable events, such as Nowruz, as further strains on volume availability.
There were many buyers confident of a price softening in February, meaning they avoided January purchases, which left them short when prices stayed firm. Demand has stayed strong, although high prices have left some converters reducing their output because of the historically high prices. Towards the end of the quarter, resistance began to grow to the record highs, with the Turkish Plastics Industry Federation calling for a joint boycott, with Chinese buyers.
Latin America PE supply was tight in most countries during Q1 amid lower production levels in Mexico and limited output in Brazil due to maintenance at several plants. Plant outages and force majeures in the US following the polar storm have reduced availability for imports to the region. Brazil’s PE exports are much lower than normal, but imports have increased.
Q1 demand for PE continued showing strength amid increased consumption of essential goods raising demand for packaging applications. Industrial activity in Brazil and Argentina are showing signs of easing and will have a greater impact on demand for injection grades. Most countries are facing elevated demand, but PE consumption in Mexico was 3-7% lower year on year in 2020, depending on the grade.
Supply tightened substantially from Q4 2020, as a spate of production disruptions in the US emerged following the winter storm that hit the US Gulf Coast. This created a supply gap within the US and in Latin America. Availability within the Middle East tightened as a result, as suppliers diverted bulk allocations to these regions in view of higher netbacks. Some unplanned and planned outages within the region further limited Middle Eastern supply.
Early Q1 demand held steady as buyers looked to stock up at the start of 2021. Trades took a hit following curtailed allocations to the region, as regional sellers exported bulk volumes to deep-sea destinations on higher netbacks. Demand and transaction volumes were further hit by the successive price hikes through Q1. Buyers purchased on need-to basis, as it became increasingly difficult for processors to pass the resin price hike on to downstream markets.
Availability remained tight in Q1. Many buyers had hoped that the Lunar New Year holidays would improve sellers’ interest in Africa, as demand in Asia fell away. Logistics issues also abounded. The severe storms in February in the US exacerbated supply issues.
Buyers were reluctant to purchase in the run-up to Lunar New Year, with many expecting prices to soften immediately after. As prices remained firm, buying interest grew. The US snow storms then drove a panicked response from some buyers, who relied on US volumes. Demand at the end of the quarter was strong, driven almost entirely by limited availability. Some buyers relied on stocks and limited purchases to avoid higher prices.
Supplies tightened significantly in Q1 as the mid-February polar storm caused the bulk of US crackers and PE plants to face at least temporary shutdowns. Ongoing strength in demand combined with the loss in production caused a significant draw down in PE inventories. Plants gradually recovered from late February through March, although average operating rates remained below pre-storm norms by the end of Q1.
Demand remained healthy. Domestic demand found ongoing support from pandemic-induced shifts in consumer behaviour included increased at-home dining and the rising prevalence of online shopping. Overseas demand for US PE also remained strong despite the steady escalation in prices, with spot demand remaining solid in Latin America and Europe while the arbitrage window to Asia remained shut throughout much of Q1.
ICIS publishes pricing reports for key polyethylene grades and offers timely and in-depth market data, including price assessments, trade activity, feedstock supply and analysis of each region’s current and upcoming export availability.
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Key trading prices and activities – Import, export, domestic prices. Offers, bids, transactions
Price alerts and market updates: Shifts in prices, latest news on the PE market developments and changes to regulations and demand trends
Plant data: Production and capacity, plant maintenance and shutdowns
Feedstock: Prices and market updates for feedstocks – crude, ethane and ethylene
Historical prices: Download and/or chart pricing from as far back as the start of ICIS coverage
Weekly market outlook: Overview and outlook for the overall PE market, including a brief commentary on the other regional markets
Supply and demand: Analysis of domestic and international supply and demand
Regional coverage: Africa, Asia-Pacific, China, CIS, Europe, Latin America, Middle East/South Asia, Turkey, US
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