BLOG: European and US LLDPE margins may in 2022 sink towards northeast Asian levels

John Richardson

14-Jan-2022

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson.

European and US linear low-density polyethylene (LLDPE) margins will retreat towards the much lower northeast Asian (NEA) levels in 2022, is our preferred scenario of the three scenarios in today’s post.

We think that:

  • China’s Common Prosperity policy shift and its zero covid policy will continue to place downward pressure on the economy, as China’s LLDPE self-sufficiency also further increases.
  • *As the pandemic becomes endemic, container freight tightness that has limited deep-sea exports to the West will ease, allowing Northeast, Asian, Southeast Asian and Middle East producers to ship more to the West – especially to Europe.*Western LLDPE demand will decline as restaurant eating benefits at the expense of supermarket food sales.
  • *Downward margin pressure will also be exerted by a rise in US LLDPE exports.

BUT, as we said, this is just one of three scenarios and there is a strong chance that container freight disruptions will continue throughout this year, leading to the big divide continuing – European and US margins remaining very high as NEA margins stay at historic lows.

We see a very small chance of NEA margins rising towards the Western levels because of the big, once-in-several-generations economic changes taking place in China – and China’s rising self-sufficiency.

Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.

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