LONDON (ICIS)--The coronavirus outbreak could cut China demand for polyethylene (PE) by 1.5m tonnes, according to an ICIS senior analyst.
“Around 1.5m tonnes of PE demand may be lost from the coronavirus outbreak if it can be controlled and downstream industries resume operations at a 70-80% rate by the second half of March,” said Amy Yu, senior analyst, ICIS Asia Petrochemical Analytics, based in China.
China PE consumption for 2019 is estimated at 35m tonnes, according to ICIS.
China PE demand typically resumes after the Spring Festival (Lantern Festival), a week after the Lunar New Year holiday.
“The average operating rate of downstream factories is estimated at about 40% because of the lack of workers until the end of February,” said Yu.
Demand for blow moulding high density PE (HDPE), used for medicine bottles is increasing but this accounts for less than 2% of total PE demand, the analyst pointed out.
“Most of the impact is on packaging consumption, which is estimated at 1m tonnes of lost PE demand. Plastic films used for packaging consumed around 18m tonnes of PE in 2019, accounting for 51% of 2019 PE demand,” said Yu.
One trader estimated that total China PE and polypropylene (PP) demand could drop around 30% year on year in the first quarter. Others estimated a potential 7-8% loss in demand for PE and PP for the entire year.
The sharpest demand declines will come from the automotive, fast-moving consumer goods and packaging sectors. Certain municipal governments are calling for shutdowns of all restaurants and stores except supermarkets and pharmacies.
Traders are in a tough spot as many stocked up prior to the Spring Festival, anticipating the seasonal demand pick-up.
Major producers have high levels of inventories in warehouses, and are waiting for trucks to ship them out, sources said.
Long distance delivery - trans-province, trans-city - is proving very difficult as drivers need permits to pass through roads.
Focus article by Joseph Chang and Fanny Zhang
Front page image: Chinese paramilitary police officers wearing face masks stand outside the headquarters of the People's Bank of China in Beijing. Source: WU HONG/EPA-EFE/Shutterstock