BLOG: Assessing confidence and the China PE demand recovery: more scenarios are needed

John Richardson


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

Because China is a managed economy there must be a high level of confidence in many aspects of how the economy is being managed.

How strong will confidence be among consumers and investors during 2023 given the bursting of the property bubble and the sudden reversal of the zero-COVID policies and what’s followed that decision?

The strength of this intangible will probably play the defining role in determining the strength of China’s economic recovery this year, making firm number-based judgements impossible.

But we do have some hard numbers on the amount of excess savings built up since zero-COVID began – $2.6 trillion of additional bank deposits, according to a 24 January Financial Times article.

The FT, however, quoted analysts who said that when you discount money transferred into banks from high-risk financial products, mainly in real estate, and the “natural growth” in savings due to higher incomes, this left just $200 billion of potential “revenge spending”.

How good will China’s exports be in 2023? Has inflation peaked in the West or might a strong China recovery reignite global inflation and dampen exports worth 20% of China’s GDP?

We’ve probably never before faced such an uncertain China outlook, which is why we’ve extended my range of scenarios for China’s polyethylene (PE) demand in 2023, as the main chart in today’s post  shows, from the usual three to four scenarios:

  • Scenario 1, the ICIS base case, sees 4% average growth across the three grades of PE. This would leave this year’s total demand at around 39m tonnes, up from 2022’s 38m tonnes (note that what should be close to the final demand numbers for last year are now available. This follows the publication of the full trade data for 2022 and ICIS estimates of January-December local production).
  • · Scenario 2 (our preferred scenario) would see 2023 demand at approximately 38.5m tonnes (2% growth) with Scenario 3 (minus 2%) at 37m tonnes and Scenario 4 (minus 5%) at 36m tonnes.

And we, of course, need four scenarios for China’s net PE imports with high-density (HDPE) the most vulnerable to a steep decline because its capacity increases over demand have been the highest in the three grades of PE (also the blog post for the relevant slide).

Last year’s net HDPE imports were 5.6m tonnes. They could be as high as 5.1m tonnes in 2023 are as low as 3.4m tonnes.

Anything in the region of 3.4m tonnes would require a razor-like focus on the HDPE net import markets other than China, which are also detailed in today’s post.

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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