China HDPE supply grows while demand wanes amid plastic ban

SINGAPORE (ICIS)–China’s supply of high density polyethylene (HDPE) is expected to be augmented by plant start-ups, while demand is due to wane with stricter plastic ban implementation toward the end of the year.

Domestic HDPE film prices in east China have fallen for three consecutive sessions, shedding a cumulative yuan (CNY) 175/tonne ($26/tonne) to CNY7,875/tonne on 19 October, according to ICIS data.

HDPE injection prices in the region were down by CNY100/tonne over the same period to CNY7,350/tonne , the data showed.

China is scheduled to add around 4.2m tonnes/year of PE capacity for the whole of 2020, the bulk of which came on stream in the third quarter, with HDPE accounting for about 51% of the total.

Import supply has also recently got a boost as Iranian cargoes of more than 100,000 tonnes – mostly HDPE and LDPE – have started arriving at Chinese ports after about three months of delay.

According to traders, six Iranian ships could not arrive at China main ports from early June because of US sanctions. Unloading of the cargoes at smaller alternate ports in China has started in September.

Demand in China, on the other hand, is being dampened by the government’s plastics ban, prompting converters to cut production and traders to take a wait-and-see stance on the market.

A complete ban on single-use plastic bags would reduce PE demand by at least 2m-3m tonnes, depending on policy implementation across provinces, according to market sources.

The government is moving toward banning use and production of single-use plastics instead of just charging a fee to restrict usage.

China will gradually restrict or ban manufacturing, sales and consumption of disposable plastic products by the end of 2020 at major pilot cities.

The nationwide roll-out of the policy is expected by 2022 as the country promotes use of degradable, recycle-friendly materials.

A complete phase out of single-use plastics in the country is targeted by 2025, based on a document issued by China’s National Development and Reform Commission (NDRC) and the Ministry of Ecology and Environment.

By 2025, China is expected to effectively control plastic pollution, substantially reduce the amount of plastic wastes in landfills of key cities, establish a complete plastics management system and make progress in the development of alternative products, according to the document.

These sustainability targets are expected to hit polyolefins demand, with PE likely to be hit hard because of its huge packaging application, especially HDPE film, which is mainly used to produce plastic bags.

Focus article by Lucy Shuai

($1 = CNY6.68)

Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.