VINACHEM

China’s imports of linear-low-density polyethylene (LLDPE) from the US soared to 519,273 tonnes in January-May 2023 – a 220% increase over the same period last year as the US replaced Saudi Arabia as China’s biggest supplier.

Imports from Saudi Arabia, the United Arab Emirates and Canada also increased as shipments from Singapore, Thailand and South Korea fell – a clear sign that the feedstock-advantaged players were winning more ground at the expense of those based on naphtha feedstocks.

In 2022-2025, ICIS estimates that global LLDPE capacity exceeding demand will average 9m tonnes per year. This would compare with an average of 3m tonnes a year in 1990-2021.

The latest data for January-May this year suggests that China’s demand could fall by 2% during the full-year 2023 following a 2% increase last year.

The fall in projected demand reflects the ICIS estimate of a dip in local production in the first five months of last year versus stronger production during the second half of 2022.

In an oversupplied China and global markets, pressure from the US could build in H2 2023 given the country’s relatively strong margins and a further increase in US capacities.

US spot ethane-based integrated variable cost LLDPE margins averaged $725/tonne with contract margins at $785/tonne from 1 January until 30 June 2023. This compared with NEA spot margins at $44/tonne for the same period.

US LLDPE capacity is forecast to increase by 7% this year following a 13% increase in 2022. US demand fell by 4% in 2022 and is only forecast to increase by 2% in 2023.

“The US must export around 45% of its total PE production to maintain operating rates at 90% following the latest wave of capacity expansions,” wrote ICIS Chemical Business editor, Joe Chang, in a 26 March ICIS news article.

“PE exports were constrained for much of 2022 by logistics challenges that resulted in frequent shipment delays stemming from shortages of truck drivers, warehouse space and container ship availability,” added Joe.

The logistics challenges have since faded into the background.

If China’s imports from the US were to continue at the same pace as in January-May for the rest of 2023, imports from the US would this year total 1.2m tonnes – 89% of the projected total increase of US LLDPE exports in 2023 compared with 2022.

We are, sadly, a long way from the bottom of petrochemicals markets in general. Markets will likely get worse before they get better as overcapacity is dealt with.  – ICIS –