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Updated to Q1 2020
Regional supply was slightly reduced initially due to maintenance shutdowns, but output from a new plant in Malaysia then started to offset some of the tighter supply. However, margins remained tight, worsened by China’s extended Lunar New Year holiday, as the country tried to contain the coronavirus outbreak. Towards the end of the quarter, a fire at the new plant caused a shutdown, while lockdowns across the region caused difficulties in supply chain logistics.
Demand across southeast Asia initially showed some signs of recovery, but China’s extended holiday and the spread of the virus to the region wiped out most of the nascent recovery. Towards the end of the quarter, despite small demand recovery in China, virus control measures, including lockdowns, resulted in major demand slump. Most converters and traders kept inventory low and purchasing on a need-to basis.
Although some local producers choose to cut their operating rates, the output losses were limited. New capacity from Zhejiang petrochemical and Hengli Petrochemical was released in February.
Resumption of work in China gradually recovered in March, but the global economic recession weighed on the market sentiment.
PE supply was balanced in some grades, and slightly long in others, but there were fewer imports than formerly, as less material arrived from the US. Demand was much better in January and February than in 4Q 2019, and by the time coronavirus concerns became apparent, demand for critical applications was very strong. Rigid and some industrial applications have not fared well.
PE demand increased throughout Europe as demand soared for PE grades used in critical food and medical applications. Rigid packaging and some industrial applications have been poor, but stretch film demand has remained good. HDPE grades have generally been weaker, with pipe mixed, but generally better than expected. By the end of the quarter some grades were getting tight, as imports were not so strong, on low netbacks and delays.
US polyethylene (PE) supply was long during the first quarter as the industry’s capacity has expanded significantly in recent years. Low density polyethylene (LDPE) supply was a bit tight on the delayed start-up of some new plants, while availability for high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) were sufficient.
US PE demand was steady to stronger in the first quarter relative to the fourth quarter, at least at the start of the quarter. January and February saw improvements in purchasing managers indices and restocking activity following seasonal slowness at the end of the prior year. The economic picture changed significantly in March as the coronavirus outbreak and subsequent reactions slowed general economic activity. Food and medical packaging applications, however, saw stronger demand in March.
Planned and unplanned production outages in the Middle East and Egypt reduced availability in Africa. US suppliers were also less aggressive with their offers at the start of the year, although allocations to the region improved in later in the quarter. Issues at the Port of Houston slowed delivery of orders made in December. Some Middle East suppliers withdrew some orders in the middle of the quarter, as they looked to prioritise their supply elsewhere.
Demand levels rose moderately following the traditionally slow start to the year but the effect of coronavirus on Asian pricing levels dampened African demand in the middle of the quarter. It has since precipitously dropped as the pandemic begins to take hold across Africa. Algerian demand was high at the start of the year after an aborted government policy saw massive reductions in exports to the country at the end of 2019.
Availability was constrained throughout the quarter. Stocks were emptied at the end of the year, while allocations were reduced from January from both Middle Eastern and US suppliers. Planned and unplanned maintenance periods saw suppliers focus their efforts to other regions. Orders of US origin material made in December were delayed in loading, exacerbating the shortage. The closure of the Turkey/ Iran border, in February, closed off a source of high density polyethylene.
Demand was healthy at the start of the quarter, as buyers reacted to shortages. There was also a perception that prices had reached the lowest they possibly could. Later demand started to fall away as the spread of coronavirus affected sentiment. The closure of the Turkey/ Iran border promoted a cautious approach by many. At the end of the quarter, many converters had closed their plants to avoid spreading the virus.
Supply was tight early in the quarter, following a busy maintenance schedule among a majority of regional producers in January and February. A delay in the start-up of some new plants in Asia further curbed volumes to the GCC as Asian markets competed for Mideast supply. Availability improved towards the end of the quarter following completion of turnarounds at a few supplier units.
Early Q1 demand was strong, propped by a need to restock in the new year. Plans to restock ahead of Ramadan also upheld Q1 demand. Demand tapered from H2 March as a spike in the number of coronavirus cases caused GCC countries to enforce restrictions in the movement of people, goods and services. A drop in consumer and household goods purchases affected packaging uptake, although grocery, foods and medication packaging picked up.
Polyethylene (PE) supply was slightly down in Q1 because increased safety measures in Argentina deliveries have slowed down production. Mexico continues to operate PE plants on a rotating schedule but never at full capacity. Pemex has restarted HDPE production at the Asahi plant but usually run at 50% capacity. The Venezuelan PE plants continue to work at very low operating rates in Q4. PE production has been normal in other countries of Latin America.
During Q1, PE demand remained weak in South America because a strong dollar has brought currency depreciation and inflation in several Latin American countries. Social unrest in Chile continues to be a factor, but protests have subsided in other countries. The coronavirus outbreak has further depressed regional demand at the end of Q1, although isolation measures were spotty at the time.
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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