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

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.