China Jan-Sept PE imports rise 18%; Mideast remains top exporter

Author: Angie Li

2019/11/29

SINGAPORE (ICIS)--China’s polyethylene (PE) imports in January-September 2019 rose by 17.8% year on year, with the Middle East likely to remain as the country’s biggest supplier of the polymer in the coming years.

Import volumes from the Middle East in the first nine months of the year increased by 15.3%.

Global PE supply-demand balance (2018 vs 2020)

Source: ICIS Supply and Demand Database

The supply-demand balance data showed that North America and the Middle East are and will continue to be the major PE supplying regions.

Northeast Asia, led by China whose consumption covers 31% of the global total, will remain the largest PE consumer market in the world, accounting for 36% of the global consumption.

Exports from North America are surging due to significant capacity expansion on the back of shale gas revolution, while capacity in the Middle East is relatively stable.

Exports from North America are expected to cover 20% of the global total exports in 2019, compared with 16% in 2018, according to ICIS Supply and Demand Database.

The proportion of exports from the Middle East is expected to fall from 52% in 2018 to 49% in 2019.

Proportions of PE exports from major regions

Source: ICIS Supply and Demand Database

PE produced by either ethane in North America or liquefied petroleum gas (LPG) in the Middle East enjoys a significant cost advantage over Asia-origin products regardless of processes.

However, exports from the US to China in January-September 2019 decreased by 35.8% year on year to 402,000 tonnes because of additional tariffs on imports from the US against the backdrop of the China-US trade war with the first round of additional tariffs effective in 2018.

If the additional 10% tariffs on low density PE (LDPE) imported from the US take effect on 15 December, the proportion of US cargoes in China’s total PE imports is expected to fall further in 2020.

Imports from the Middle East accounted for 52% of China’s total PE imports in January-September 2019, flat from last year.

China remains the first choice for Iranian exports because of the strong growth in consumption, while Iran has met resistance in exporting to other regions due to sanctions from the US, market participants said.

China’s PE imports from Iran were close to 1.9m tonnes in January-September, up by 26% year on year.

Imports from Saudi Arabia also increased by 26% during the same period due to the shift in global trade flows.

Imports from other member countries of the Gulf Cooperation Council (GCC), such as Qatar and Kuwait, also increased slightly year on year.

The proportion of cargoes from Asia-Pacific (excluding China, similarly hereinafter) is expected to increase slightly from 22% in 2018 to 23% in 2019.

The significant increase in PE exports from southeast Asia to China was mainly attributed to the open arbitrage window, according to market participants.

HDPE film Southeast Asia-China arbitrage window

US exports to North America, South America, Europe and southeast Asia increased significantly as a result of additional tariffs imposed on US cargoes destined for China.

PE prices in these markets fell to a low level and prices in China are no longer the lowest in the world.

ICIS data showed that prices of HDPE (high density polyethylene) film in southeast Asia were assessed at $790-830/tonne (dutiable) on 15 November, while prices in China were assessed at $860-890/tonne CFR (cost and freight) China Main Ports (CMP), with the average price gap at $65/tonne.

Processed recycled PE from Asia-Pacific also entered China under the H.S. code for virgin PE, increasing the exports from Asia-Pacific to China.

In southeast Asia, exports from Indonesia and Malaysia were especially significant.

China’s PE imports from the Middle East and southeast Asia are likely to increase further in 2020 due to capacity expansion in the two regions, if the additional tariffs on US-origin products are still in place.

PT Chandra Asri’s 400,000 tonne/year linear low density PE (LLDPE) unit in Indonesia has achieved on-spec production at the end of 2019 and sold products to China.

Petronas is expected to sell products from its 750,000 tonne/year PE unit, located in its RAPID refinery in Malaysia, in the first half of 2020.

In the Middle East, commercial sales from Orpic’s 880,000 tonne/year PE unit in Oman are expected to be available in mid-2020.

Focus article by Angie Li

Photo: A container ship at Muscat port in Oman. (By Guenter Fischer/imageBROKER/Shutterstock)

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