BLOG: The old China and HDPE, the new China and the future of demand
SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson.
The Economist has run a special briefing on China in its latest weekly issue that makes the same points on demographics and debts that we’ve been making in the blog since 2011. As The Economist concludes, an era of significantly lower economic growth in China has likely begun.
In today’s post, we detail what The Economist has to say and how it reflects are warnings from as long as 12 years.
We then discuss the effect that favourable demographics and the post-2009 debt bubble had on China and global high-density polyethylene (HDPE) demand, as we work though the impact on all the major polymers one by one, in analysis we haven’t seen anywhere else.
For example, in HDPE last year:
Developing world ex-China demand generated by
5.26bn people was 17.7m tonnes.
China’s demand from just 1.45bn people was 17.3m tonnes.
Also see the other slides in today’s posts, including an outlook for China’s HDPE demand growth this year, which is in line to fall by 3% as China’s New Normal takes effect.
It is possible that 2021-2023 will see three consecutive years of the lowest percentage demand growth in China HDPE since 1990 – minus 3% again. In 1990-2020, average annual demand growth was 13%.
Record-low China HDPE injection grade price spreads over naphtha feedstock costs in 2022 and 2023 point in the same direction.
As mentioned, we’ve been highlighting the risks from China’s demographics and debts since 2011, as have some other analysts. So, hopefully, you should be prepared for what’s going to happen as the pressures have built to the point where there is really no going back, as The Economist underlines.
As the main chart in today’s post illustrates, there seems a distinct possibility that China’s HDPE demand growth will turn negative from hereon in.
The ICIS Base Case sees annual consumption growth averaging 2% between 2023 and 2040. But because of the three historic events in China – highlighted in an earlier slide – that greatly inflated China’s consumption, demand growth could go negative.
Our downside assumes of an average of minus 1% growth in 2023-2040. This would see cumulative demand 134m tonnes lower than the Base Case.
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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