VINACHEM

China will be the lynchpin for global demand recovery in polyolefins, a LyondellBasell executive said on Wednesday.

“Ultimately, I think China is the lynchpin here. It’s the largest market in the world and the biggest importer of polymers in the world, even with all the capacity they’re adding. If that demand comes back, that will move the needle,” said Ken Lane, executive vice president, Global Olefins & Polyolefins at LyondellBasell.

Lane spoke at the Goldman Sachs Industrials and Materials Conference.

China will not be able to invest enough to become self-sufficient in polyethylene (PE) and thus will continue to be a net importer in the long term, he noted.

“I don’t see them building enough capacity and frankly I don’t see them getting the returns on these investments, so they’re going to slow their investment levels down. They’re going to continue to import 15-20m tonnes of PE a year for the foreseeable future,” said Lane.

China is adding capacity at around 6%, about the level of demand growth, he noted.

“That’s not far off what they’ve grown at in the past. They just have to get out of the COVID lockdowns they’ve been in… If you’ve been trained to stay inside and not consume anything, it’s hard to come out of that shell. And it’s taking longer than we thought,” said Lane.

“Getting back to 6% demand growth in China is easy, typically after a low growth year,” he added.

Inventories in China are at low levels as buyers have been cautious, buying only what they need, the executive noted.

The overall demand recovery in polyolefins and other chemical markets has been weak so far this year, with a potential inflection point being pushed out to later in the year.

“It is definitely more moderated than what we hoped at this point, so its probably later in the year rather than… we were hoping in Q2 that we would see more improvement,” said Lane.

“It’s certainly less dynamic than we hoped,” he added.

On the positive side, there are some “green shoots” in the European automotive market. China’s auto market is also a bright spot, the executive pointed out.

For LyondellBasell’s Olefins & Polyolefins (O&P) business, it will likely take until mid-decade to get to “normalised” earnings levels as demand growth absorbs the new supply coming on, he said.  – ICIS –