PE supply in the third quarter has the potential to increase as new ethane-based plants come on stream in North America and much of this product is destined for export. Most players, however, expect significant quantities from new capacities only in the fourth quarter or even 2019. Imports from other regions could increase as European spot prices rise.
Demand is expected to be relatively stable as most sources expect the new US capacities to be on their way soon, so few expect to be short of product mid-term. Short-term there could be tightness in some grades as low price levels are reducing imports to Europe, but on the whole a stable demand position is most likely.
US polyethylene (PE) supply is likely to continue to improve as new plants continue to improve their operating rates while lingering production issues from the first half of the year are likely to be resolved within the coming weeks. However, one new plant that was anticipated to start up in the second half of 2018 may have its start date deferred until 2019.
US polyethylene (PE) domestic demand is expected to remain mostly steady while overseas demand may face challenges from a stronger dollar and renewed trade tensions between the US and several of its key export destinations. The US already exports around 20% of its PE production and this percentage is expected to rise as additional capacities come online.
China expects lower import volumes in the third quarter but domestic supply will increase upon completion of turnarounds. Southeast Asian supply might tighten amid several plant shutdowns. Import supply from the US might spill over to other Asian region should China impose the additional 25% tariffs on certain PE grades.
Depreciation of major Asian currencies against the US Dollar is expected to curtail demand for imports further in the third quarter, which might exert downward pressure on prices. However, trade activity might pick up at the end of July or early August when converters start to receive orders for year-end.
Supply levels for HDPE film should recover, now that HDPE 100 pipe prices are softening in China. Other grades are likely to remain plentiful. US providers had begun to make offers for North American origin material from recently expanded capacities. This is likely to bolster supply of linear low density polyethylene (LLDPE) particularly.
The rainy season will continue into August and demand will likely remain subdued until then, at least. Following this, stock levels may force some buyers to return to the market. The easy availability of low density polyethylene (LDPE) and LLDPE may allow buyers to take a relaxed approach to purchasing, continuing to live hand to mouth for the foreseeable future.
The end of Ramadan will see Middle Eastern producer returning to full time production, meaning greater availability. US suppliers also made their first significant inroads in Turkey during the second quarter and will likely continue to provide extra quantities. This may replace some of the business lot with Iran following US sanctions.
Now that presidential elections are complete and Ramadan there should be some pick up in activity. Many players are focusing on the value of the Turkish Lira, which remains very low in relation to the US dollar. Many buyers may remain wary of investing until it becomes clear what economic plans President Erdogan plans to instigate.
Middle East’s PE supply would likely remain stable with no scheduled maintenance activities among the majority of producers. A slowdown in HDPE pipe demand in China may impact supply HDPE film and blow moulding availability within the region, as producers could turn to making more of these following slower pipe uptake.
GCC demand is likely to see little change in demand from the end of Q2. Some uptick may be observed in August ahead of the Eid ul-Adha holiday. East Med demand is likely to remain weak until the political situation in Iraq improves as Iraq remains the primary market there.
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