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How will the global PE / PP market structure go in the future?

2018-10-18 Source:

According to IHS analysis, as North America, the Middle East, and China's low-cost manufacturing of new plastic chemical production capacity surges, the global key plastics such as polyethylene (PE) and polypropylene (PP) markets are moving in the direction of oversupply, which will weaken Manufacturers' profits change the global competitive landscape.

1/3 of the world's new PE comes from the United States

IHS predicts that from 2015 to 2020, the world will add 24 million tons of PE, of which more than 1/3 of the new PE capacity of about 8 million tons will come from the United States, which will significantly increase the United States' PE, PP and other chemical The net export value of products rebalances the global chemical trade flow that has benefited the Middle East for decades.

"The growth of shale gas has made North American polyethylene and polypropylene producers more competitive in the market, and the Middle East has long been the world's lowest-priced producer of polyethylene and polypropylene." IHS Chemical's polyolefins and plastics global Commercial director Nick Vafiadis said.

He pointed out: "In the short term, this overcapacity is good news for North American processors. Due to the expansion of PE capacity, North American processors will be more competitive in the global market. However, in terms of production, The economy will face challenges. In the short term, global capacity expansion will exceed the growth of market demand, and profits will also be affected. "

"Chemical producers want to take advantage of continuing lower U.S. natural gas and LNG prices to expand related infrastructure projects," said Chris Geisler, director of chemical consulting at IHS Chemical. "The U.S. solid plastics trade and bulk liquid chemical products trade will have significant changes. The expansion of production capacity means that chemical trading and logistics activities of producers and traders will increase significantly, while important US, and global ports, terminals and logistics services It will also grow significantly. "Geisler added.

China's PE / PP capacity will increase by 17 million tons

"Besides North America, coal-to-olefin technology has also helped China increase its production capacity, making China's influence as a low-cost PE supplier also increasing," Waffeldis said. According to IHS statistics, China is expected to add about 17 million tons of polyethylene / polypropylene production capacity in the next five years, which will further promote market volatility.

"The United States and China are currently competing with the Middle East for the global polyethylene / polypropylene market share, which will have a significant impact on the pricing and profits of PE and PP. We at IHS expect to see major changes in the global industry in the future." Waffle Diss said. "There is a clear trade imbalance in both North America and the Middle East, as their increased capacity far exceeds their domestic market demand, so exports are crucial for producers."

Middle East exports to Europe

According to IHS analysis, as of now, the PE imported from the Middle East to Europe has exceeded 2015, because the European region has a strong market demand for PE, which provides Middle East producers with an attractive net return. In addition, the import value of HDPE from January to February 2016 reached the highest value in the last 8 years, which was 148,000 tons, and the export value was the lowest point in the same period, only 42,000 tons. IHS believes that other PE grades are undergoing a similar trend, that is, production is gradually decreasing.

"According to IHS Chemical's forecast, PE pricing in Asia will remain low for the rest of 2016. As European manufacturers basically do not transfer profits, this means that in the coming months, the net return value from the Middle East to Europe Still competitive, "Waffeldis said. "Net return value means that PE products imported from the Middle East to Europe will remain at a high level."

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