Malaysia eases some output restrictions but PE demand still weak

SINGAPORE (ICIS)–Malaysia’s decision to allow some manufacturing operations to resume full capacity may not have much impact yet on the country’s polyethylene (PE) sector because downstream demand remains generally very weak.

According to local media, Malaysia has eased some of the restrictions imposed during the earlier stages of its Movement Control Order (MCO) and the government has allowed some companies, which previously had operating rates capped at 50%, to increase output back to full capacity. These companies  include converters or plastic packaging producers in the PE industry.

However, despite the approval to raise operating rates, the key hurdle was that downstream demand for PE products had not shown any major improvement, industry players in Malaysia said.

“Some converters are allowed to ramp up production but generally demand is still very weak,” said a source.

Malaysia first imposed the MCO on 18 March and has since extended it to 12 May as part of its efforts to control the coronavirus outbreak. Only certain businesses deemed as essential had been allowed to operate during this period but operating rates had to be limited to 50% or lower.

PE resins are widely used in the food packaging and medical supplies industries.

PE demand in southeast Asia has been severely dented over the last few months and much of this was attributed to restrictions similar to what Malaysia imposed in March.

“We expect a large amount of global end-user PE consumption to be impacted in 2020 if the pandemic continues through the second quarter,” said ICIS Senior Analyst Amy Yu.

“Consequently, Asia PE demand growth will be lower than the level previously expected in March, in particular for export-oriented countries.”

Additionally, the typical demand increase seen prior to the Muslim fasting month of Ramadan has failed to materialise because the MCO has curbed many of the traditional festive markets in Malaysia, which tend to drive increased packed food sales.

Ramadan started on 24 April in Malaysia, with the Eid ul-Fitr holiday to come after.

Focus article by Izham Ahmad