VINACHEM

As China’s high-density PE (HDPE) imports fell to 2m tonnes in January-May 2023 from 2.5m tonnes during the same period last year, the US’ share of China’s import market jumped to 13% from 3%.

Year-on-year HDPE imports from the US rose by 335% to 268,892 tonnes. Imports from Saudi Arabia fell by 27% to 413,176 tonnes with the UAE down by 26% to 388,516 tonnes and South Korea 28% lower at 263,711 tonnes.

But while Middle East feedstock-advantaged players have lost ground in the world’s most important HDPE market, ICIS Cost Curve slides in today’s post show the region remains in a strong position.

As this downturn continues, it is the naphtha or liquids-based players which will remain under the greatest pressure.

Further rate cuts and plant closures seem likely to bring global petrochemicals markets in general back into balance.

The core problem, in my opinion, is that the old conventional view on China missed the severity of its economic slowdown during a period when the country’s petrochemicals self-sufficiency was increasing.

In HDPE, for instance, China’s net imports (imports minus exports) could be just 4.3m tonnes in 2023 compared with 9m tonnes in 2020.

Meanwhile, US HDPE capacity is increasing with the US needing to export 45% of its PE production in general to hit operating rates of 90%.

This downturn will end. They always do, and, quite often, more rapidly than anyone expects.

Producers, therefore, need to stay close to what the netback, spreads, margins, trade flow and supply and demand data re saying to spot signs of recovery.

The other key to success is doubling down on global sales strategies. There are plenty other big HDPE net import markets aside from China with their own pricing, trade flow and demand and supply dynamics.  – ICIS –