BLOG: New supply chain problems prolong the big HDPE divide as imbalances build

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

Just when it looked as if supply chain problems might be easing, China’s Zero Covid policy threatens more disruptions.

Also looming on the horizon is the expiry of labour contracts in July at two key US ports, Long Angeles and Long Beach. The last time contracts were up for renewal, there was industrial action.

And then there is the global shortage of truck drivers.

But China’s high-density polyethylene (HDPE demand growth is undergoing a long-term decline because of Common Prosperity with Zero Covid also damaging growth.

China plans to raise its HDPE capacity by another 23% in 2022.

South’s exports could increase to 2.4m tonnes this year from 1.6m tonnes in 2021 on its new capacity, with new plants scheduled to start-up in the Philippines and India.

As US production normalises, and as US HDPE capacity also rises, US exports could jump from 2.9m tonnes in 2021 to 4.5m tonnes in 2022.

Something must give. European and US margins, which have recently fallen, must eventually move much closer to the depressed Asian levels. Last week, Northeast Asian HDPE margins were at a record low at minus $198/tonne.

But the odds of this major rebalanacing happening in 2022 have declined because of the new supply chain issues that continue to limit exports of Asian surpluses to the West.

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.