BLOG: Your complete and updated outlook for global polyethylene in 2023

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

See today’s blog post for a complete and updated outlook for global polyethylene (PE) markets in 2023.

The things to watch out for are:

• The extent of China’s recovery from zero-COVID. Nobody knows for certain because the intangible of the strength of consumer and investor confidence defies data analysis. This is why you need a wider-than-usual range of demand scenarios. China’s PE demand could increase by as much as 4% or decline by as much as 5%. My preferred scenario is for 2% growth.
• We have reached a tipping point on PE net imports where only minor changes in local operating rates and demand growth will make a big difference. This year’s PE net imports could either be as little as 500,00 tonnes lower than last year or as much as 3.3m tonnes.
• European PE production may be substantially curtailed next winter because of gas shortages. This may lead to increased export opportunities, also depending, of course, on local demand growth.
• Further temporary capacity closures are inevitable because ICIS expects global demand to be 26m tonnes less than global capacity in 2023. This would be up from a 10m tonnes annual average of excess capacity over demand in in 2000-2021. This year’s global operating is expected to fall to 79% from the 2000-2021 average of 86%.
• Permanent shutdowns may take longer because of integration with upstream refineries. The pace of these closure is likely to be determined by the place of electrification of transportation, especially in Europe.
• US PE exports are set to further increase because of new HDPE and LLDPE capacities. The extent of increases will be set by the strength of overseas demand and local logistics issues.

What should you do to deal with the downcycle? Here’s our user guide, along with some important context:

• Micro-management of markets has always been essential during industry recessions.
• But this downturn is likely to last a lot longer than any other downturn since the 1970s. And we are living in a vastly more globalised petrochemicals world than in the 1970s.
• So, there will be many more troughs and dips – caused by fluctuating demand, supply and pricing between different countries and regions – than has been the case before.
• This creates a great opportunity to save vital cash flows by not allocating tonnes to markets that are weak, while allocating volumes to markets that are strong.

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.