BLOG: China 2022 PE demand may fall by 5% with net imports 3.2m tonnes lower
SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. There is some excitement out there that China’s polyolefins markets have finally bottomed out.
But any recovery seems likely to be supply rather than demand driven. Rate cuts at local refineries in April-June were said to be the highest ever, reflecting weak fuels demand. The rate cuts might reduce the availability of feedstocks to make polyethylene (PE) and polypropylene (PP).
But if fuels demand is weak, so must be polyolefins demand. Weak demand looks set to continue because China has no choice but to stick to its zero-COVID policies.
And because of the “Common Prosperity” economic reforms, low economic and so chemicals demand growth is, anyway, no longer seen as such a bad thing. China has moved past its era of growth for growth’s sake.
Still not convinced? Then look at the ICIS data which show:
Under a best-case outcome, average PE demand across the three grades would decline by 2% in 2022 over last year. The medium-case scenario would see consumption fall by 4%, which is what is suggested by annualised local production and net import data for January-June this year. The worst-case result would see a 5% contraction in demand.
A best-case result of total PE net imports falling by 630,000 tonnes over last year. The medium-case outcome would see net imports – 1.4m tonnes lower – again based on annualising January-June net imports. My worst-case scenario sees net imports falling by 3.2m tonnes.
The thing is, though, that this kind of analysis will become redundant as we move from a chemicals industry driven by constant volume growth. Events in China and elsewhere tell us that the new winners will need to focus on value. This will require a whole new set of success metrics.
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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