SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson.
Chinese demand for low-density polyethylene (LDPE) could fall by 8% in 2022, which would be the worst year of growth since 1990.
Of course, there’s nothing new about weak demand for LDPE in China, with confirmed consumption contracting 2% in 2020 and 5% in 2022, according to ICIS.
But what makes this year different is that in 2020 and 2021 local production held up well while net imports declined, in 2022 both net imports and local production are down. Local exploitation rates this year could be their lowest since 2000 at just 77%.
LDPE consumption in 2020-21 suffered from high prices relative to linear low density PE (LLDPE), which competes for many of the same end-use markets.
But now the broader economy is the challenge for LDPE and all other chemicals and polymers in China. This is the result of the following:
- China’s abandonment of “growth for growth’s sake”. As he tries to build a new model of economic growth (we don’t know if that will work), there is a lot of collateral damage to be expected, especially right now in the real estate market which, as ICIS data shows , has been a major driver of the extraordinarily strong growth in demand for private equity in China since the housing bubble began to inflate in 2009. In August this year, property prices in nearly 70 Chinese cities fell, according to Reuters.
- In the short to medium term, China’s zero-COVID policies will add further downward momentum to the economy. China cannot afford to abandon these policies due to the limited effectiveness of its vaccines.
These economic challenges come as China increases its self-sufficiency in PE.
These are very difficult times for our industry. We urgently need a plan B, as this is not a normal down cycle.
Editor’s Note: This blog post is an opinion piece. The opinions expressed are those of the author and do not necessarily represent those of CIHI.