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Updated to Q3 2020
China’s Q3 production increased compared with year-ago figures on limited maintenance shutdowns and plant start-ups. Bora-LyondellBasell ’s PE unit started up in August. In addition, delayed Iranian cargoes were discharged in September. Southeast Asian supply remained largely sufficient except for LDPE, which was short due to turnarounds and outages in the Middle East and north Asia.
China domestic demand improved in Q3 as most downstream production resumed. Packaging, agricultural film and pipe demand increased during the traditional peak season in September and October. China also launched a one-month consumption promotion between September and October that could boost packaging demand. Southeast Asian demand remained stable. No major improvement was seen in the region as it struggled with the economic impact of the coronavirus.
Supply was grade driven and also affected by imports in Q3. US imported volumes reached a level similar to those from the Middle East by June. The US was severely affected by Hurricane Laura. This led to export offers from the US soaring and by October FOB offers from the US Gulf were higher than delivered prices in Europe, leaving traders unable to source material. Europe’s “home-grown” PE grade – LDPE – was balanced to long by the end of the quarter as demand fell.
Demand was back to normal in Q3 following a spurt supported by consumer panic buying in Q2. Demand was steady but weakened in September, as buyers had stock and had expected September pricing to be at worst stable. Food packaging remained good while stretch film in industrial applications wavered. An increase in coronavirus cases throughout Europe led to nervousness and caution in buying.
Supplies tightened during Q3, mostly due to the impact of Hurricane Laura, which caused a number of plant shutdowns and force majeure declarations along the US Gulf Coast. Export allocations were curtailed by product shortages while domestic spot availability also tightened. Plants in the Lake Charles, Louisiana, area remained down for an extended period amid prolonged power outages in the area.
Demand remained healthy in both the domestic and the export market. Domestic demand has increased for LLDPE and LDPE while HDPE demand has moved back to pre-crisis levels. Food packaging demand is strong as consumers are taking more meals at home, while consumer durable applications recovered in Q3 after declining in Q2.
US PE prices were increased in the early part of Q3, making them uncompetitive. Rising prices saw many players stockpile at the beginning of the quarter. Supply from the US was cut off by Hurricane Laura. A pick up in China saw many sellers priortise the Asian market.
Demand growth was sluggish through Q3, although it trended upwards as lockdown measures were eased across the continent. Seasonal factors as well as an uncertain economic outlook limited buying interest. Low crude prices and restrictions to the tourism industry severely limited foreign exchange flowing through many African countries.
Availability of PE suffered through the third quarter from a combination of production outages and competition from Asia. China has seen a boom post-lockdown, attracting plenty of offers from across the world. Turkish prices were slow to keep pace, as demand was still sluggish. Allocations to Turkey were cut, as a result. US-origin cargo became scarce following Hurricane Laura and US suppliers have only just returned to market.
Demand improved through the third quarter slowly and gradually. Converters that had reduced operating capacities only increased them step by step. Local producer Petkim eased some supply pressure for imported material by offering competitive prices. The weakness of the underlying economy limited demand growth.
Early Q3 saw tight supply, with greater seller allocations to China and southeast Asia owing to stronger demand and higher prices there. Supply shortages also stemmed from production and logistical challenges at a few facilities in Saudi Arabia amid the pandemic spread. Prolonged maintenance activities at a major producer unit further capped inventories and allocations, with the supply restrictions persisting through the quarter.
Demand showed some recovery, as restrictions previously put in place during the pandemic were lifted to allow for movement of people and services. Uptake in the downstream food and hygiene applications stayed robust, with more demand for disposable PE hygiene sheets and single-use food packaging items. Demand for products that fell in the non-essentials category, such as moulded consumer and industrial goods and packaging, was slow.
Supply tightened further in Q3 amid strong packaging demand. Several buyers described delayed deliveries and reduced resin availability. Braskem increased operating rates to meet higher demand. Exports are at reduced levels or unavailable in several countries. Hurricane Laura is estimated to have reduced US production by around 15%, limiting imports from a major export hub.
Q3 demand related to essential goods including food, medicine and hygiene packaging have continued close to normal pre-crisis levels. Agriculture, automotive, industrial, construction and durable goods demand showed significant improvements but remain lower than last year. As has been true historically, Q3 demand for PE was robust.
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
Middle East/South Asia:
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