Polyethylene prices, news and analysis

Updated to Q3 2019

Asia

Local China Q3 supply largely tightened as several domestic producers had maintenance shutdowns. Import supply decreased from mid-September amid several production issue in the Middle East, causing temporary apparent shortage, following the Saudi attacks. In southeast Asia, several planned and unplanned shutdowns as well as lower production rates in Indonesia, Thailand, Malaysia and India, reduced regional supply. On the other hand, supply availability from the US sustained the market for most of Q3 period.

Escalating US-China trade war dampened market confidence and weighed down on demand throughout the third quarter, which was a traditionally lull period. China demand rebounded in September amid restocking before the week-long National holiday in the first week of October, amid increased year-end orders. Converters in southeast Asia remained cautious and kept lean stocks, purchasing their cargoes on as-needed basis. Traders refrained from building up their inventory, opting to do back-to-back trade instead.

Europe

Polyethylene (PE) supply was ample in Q3, and while contracted volumes and pricing mostly followed upstream ethylene, spot prices were more open to influence from imports, mainly from new plants in the US. It is the imports from new capacity that have had most impact on supply in Q3. A series of planned cracker outages was expected to have a tightening effect on polymer supply, and contracted demand could have been boosted by this.

Demand for contracted volumes has been sustained, while smaller sellers and distributors have noted a significant dip in demand. It is not clear whether anti-plastic sentiment downstream is yet having an impact on volumes, but sources upstream and downstream are aware of the pressing need to conform to new regulations that will affect demand for virgin product. Imports of US PE are thought to be affecting demand in Europe.

US

US polyethylene (PE) supplies remained long throughout the third quarter. The US is in the midst of a significant build-up of new PE capacity and ExxonMobil started up a new 650,000 tonne/year PE line at its Beaumont, Texas facility. Inventory levels lengthened throughout most of the quarter, with warehouses and bagging facilities along the US Gulf Coast at or close to full capacity.

Domestic polyethylene (PE) demand was steady during the third quarter. The large number of consumer applications served by PE products along with better packaging demand stemming from the increasing popularity of online shopping helped insulate the PE market from the impact of the global manufacturing slowdown. Overseas demand improved as US producers took advantage of their low-cost position to gain market share in Europe, Africa and Latin America.

Africa

Supply has been strong throughout the third quarter. The escalating trade war between the US and China created a major blockage for US PE sellers. With the Chinese market cut off for their expanded capacities, they pushed aggressively into other markets, including Africa. Poor Chinese demand also meant that many other regions found themselves with surplus they were desperate to sell. As such, supply has been abundant throughout the quarter.

Demand is traditionally slow over summer but buyers were aware of the developing price war and were happy to sit and let it play out. Expectations had been that September would bring a seasonal improvement but actually saw a continuation of preceding fundamentals. The attack on Saudi petroleum infrastructure in the middle of September also struggled to make an impact. Although demand did climb, most buyers choose to rely on their ample stocks.

Turkey

Turkish players have had no issue in obtaining PE during the third quarter. The effect of the US-China trade war, in limiting global buying interest has left suppliers desperate to place material. Prices reached historic lows as a result. US suppliers in particular were aggressive in pushing material but other regions also pushed hard, such as Europe and Iran. LDPE supplies have taken a hit at the end of the quarter, due to production issues in the Middle East.

Demand levels have been low during the third quarter, which is traditionally a weak period. Eid ul-Adha creates a large drop in buying interest in the middle of the quarter. Despite some positive economic movements, such as the improvement in the value of the lira against the US dollar and reduction of interest rates underlying economic activity has remained muted.

Middle East

Regional supply stayed ample. Uncertainty in the Chinese market resulting from the trade war led to buyers remaining cautious to purchases, which contributed to a stock build-up among producers. A ban on single use plastic bags enforced in India from March and in Pakistan from August left suppliers flushed with stocks. A quicker than anticipated resumption of operations at Saudi units following the attack on its oilfields also limited disruption to supply levels through September.

Demand emerged seasonally weaker in July and stayed soft through August, owing to a seasonal lull in the downstream construction sector during the peak summer season. With a large majority of the population also traveling outside of the region during the summer holidays, demand stayed soft through the first two months of Q3. Despite expectations of a seasonal uptick September onwards, demand stayed largely sluggish as the US-China trade war contributed to significant uncertainty.

Latin America

Polyethylene supply declined in Q3 with the Dow cracker outages in Argentina and the ethylene shortages in Mexico that have resulted in permanently lower Pemex production. Pemex opted for concentrating HDPE production on the Mitsui plant. The Venezuelan PE plants have worked at very low operating rates in Q3, estimated at less than 25%. PE production has been normal in other countries of Latin America.

During Q3, demand dropped in South America because a strong dollar has brought currency depreciation in several Latin American countries. Argentina has been the most affected country in Latin America, and Brazil has shown the same symptoms, although in a smaller scale. The currency decline affected also Chile and Colombia. Q3 demand has been softer than expected in Mexico, and prices have declined because of oversupply.

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