ICIS Reports (21 December 2019)

ICIS Reports (21 December 2019)

25/12/2019 Share
ICIS Reports (21 December 2019)

Asia & China market

Polyethylene

The Asian polyethylene (PE) import market was largely stable-to-soft amid thin trade and weak buying interest in the run up to the year end. Some firm offers from Middle Eastern suppliers for January shipments were met with resistance from buyers. Converters refrained from purchasing cargoes to avoid the arrival of cargoes during the Lunar New Year holiday in late January. There was also thin buying interest for February and March arrival cargoes amid uncertainty surrounding the impact of a US-China trade deal. Local China producers’ inventories settled at 600,000 tonnes on Friday. Some southeast Asian producers plan to shut their PE lines in January amid poor margins and to ease sales pressure.

Outlook:

• Asia demand to remain slow ahead of Lunar New Year holiday

• China’s tariff exemptions may increase US-origin PE imports

• More regulated regional SE Asia supply in January amid shutdowns

Asia PE market outlook for December:

Buyers are increasingly in a wait-and-see mood because of concerns about lower consumption ahead of the Lunar New Year holiday. Most small- and medium-sized plastic processing factories usually shut two weeks before the holiday until after China’s Lantern Festival on 8 February. Local demand might not recover until mid-February. Southeast Asia’s PE supply will build up in 2020. PRefChem’s new 350,000 tonne/year LLDPE plant in Pengerang, Malaysia, is undergoing trial runs and is expected to start commercial operations soon, followed by the company’s new 400,000 tonne/year HDPE plant. China’s Ministry of Commerce said it would suspend imposing tariffs on a list of US imports. The move was scheduled to take effect on 15 December, with LDPE listed with additional tariffs of 10%. As a result, US LDPE trade to China will continue as normal unless any changes arise from the US-China negotiations. US HDPE and LLDPE cargoes will continue to target southeast Asia first, particularly Vietnam, Indonesia and Malaysia. That is because China has since September 2019 imposed an extra 30% tariff – 36.5% as a whole – on US HDPE and the majority of LLDPE cargoes. There are no indications as yet that these tariffs will cease. The market has growing concerns about the impact of the trade dispute between the US and China continuing into 2020, as well as a slowdown in consumption growth. India’s GDP growth forecast for fiscal year 2019 (April 2019 to March 2020) is seen to be slowing at 5.1%, as domestic consumption was limited by slow employment growth and aggravated rural distress, according to the Asian Development Bank (ADB).

 

Polystyrene

• Demand positive on pre-CNY restocking

• Restocking robust appliance sector especially for HIPS

• January cargoes short in supply

Outlook:

• Q1 supply tight on ongoing Asian turnarounds

• Healthy margins motivate sellers to keep run rates at 100%

• Demand for HIPS to remain positive

Northeast Asia

The assessed range for GPPS reflects trades at both ends for January. The price range for HIPS reflects workable levels at the low end and a trade for 100 tonnes for January shipment.

Southeast Asia

The assessed range for GPPS reflects trades at the low end and offer level for January at the high end. The price range for HIPS reflects workable levels at the low end and a trade for 100 tonnes for January shipment.

China

The domestic China price reflects deals and discussions.

Analytics

Although average margins in the styrene monomer (SM) market have been fluctuating around the breakeven point recently, the average margin level for 2019 is about yuan (CNY) 1,000/tonne. Moreover, ICIS forecasts that the average gross profit rate in 2019 will be around 11%, which is the second highest level since 2007. This is because of good downstream demand this year. The accumulated demand for SM in China in 2019 is estimated to be nearly 8%, despite the ongoing US-China trade war and slower China GDP growth. This growing demand mainly comes from higher operating rates in China’s polystyrene (PS) industry stimulated by historically high profits since Q4 2018. The average operating rate of PS plants in 2019 is estimated to be higher by 11% from last year. However, due to large SM expansions expected in 2020 but limited new capacity from the downstream sector, ICIS forecasts that the high SM gross profit rate would be harder to achieve going forward.

 

Middle East/South Asia

 

 Polyethylene

 

• January offers awaited

• China-US trade deal lifts sentiment

• India posted prices rolled over

Polyethylene (PE) prices across markets remain stable, as December trades are now closed. Markets in the Middle East have entered the year-end holiday lull period and trade is set to resume in early January, when January shipments are discussed. Buyers in India and Pakistan look to receive January offers in the following week, but trade levels may remain capped owing to the year-end holidays in most global markets. China's announcement of a suspension of tariffs on some US-origin polymers led to market players speculating on the impact of this on the broader global PE market, as they continued to wait for further clarity surrounding the grades included.

Asia PE market outlook for December:

Buyers are increasingly in a wait-and-see mood because of concerns about lower consumption ahead of the Lunar New Year holiday. Most small- and medium-sized plastic processing factories usually shut two weeks before the holiday until after China’s Lantern Festival on 8 February. Local demand might not recover until mid-February. Southeast Asia’s PE supply will build up in 2020. PRefChem’s new 350,000 tonne/year LLDPE plant in Pengerang, Malaysia, is undergoing trial runs and is expected to start commercial operations soon, followed by the company’s new 400,000 tonne/year HDPE plant. China’s Ministry of Commerce said it would suspend imposing tariffs on a list of US imports. The move was scheduled to take effect on 15 December, with LDPE listed with additional tariffs of 10%. As a result, US LDPE trade to China will continue as normal unless any changes arise from the US-China negotiations. US HDPE and LLDPE cargoes will continue to target southeast Asia first, particularly Vietnam, Indonesia and Malaysia. That is because China has since September 2019 imposed an extra 30% tariff – 36.5% as a whole – on US HDPE and the majority of LLDPE cargoes. There are no indications as yet that these tariffs will cease. The market has growing concerns about the impact of the trade dispute between the US and China continuing into 2020, as well as a slowdown in consumption growth. India’s GDP growth forecast for fiscal year 2019 (April 2019 to March 2020) is seen to be slowing at 5.1%, as domestic consumption was limited by slow employment growth and aggravated rural distress, according to the Asian Development Bank (ADB).

 

Europe

 

Polyethylene

• Europe winding down

• China suspends some US PE tariffs

• ExxonMobil Gravenchon PE starts up

 

Polyethylene (PE) activity is slow as the year draws to a close. 2020 discussions have been going on, with some buyers saying they will take more spot volume than in 2019. Contracted volumes are expected to continue to play the larger role. Some special deals are done for volume, but many prices have remained stable.

Strikes are continuing to affect business in France.

Crude and naphtha have firmed.

 

Outlook:

• Better 2020 contracted deals sought out

• Stronger naphtha could affect Jan ethylene

• More imports to arrive in Europe

Supply and demand- ICIS Analyst's View

This abundance of spot PE offers may not affect the immediate behaviour of some buyers who are relying on contracted volumes, but they are affecting market sentiment in Europe for what concerns purchasing plans and strategies for 2020. A total of 19 new PE projects are expected to start operations globally in 2020. Between December 2019 and Q3 2020, more than 3.3 million tonnes of new PE capacity is expected to start operations in the US while, considering only the year 2020, a total capacity above 4.5 million tonnes is forecasted to start operations in Asia.

 

Turkey

 

Polyethylene

• Prices diverge

• US suppliers increase offers

• Business winds down for year-end

 

Turkish polyethylene (PE) price levels have diverged this week, as US origin suppliers increased their offers following asoftening by Middle East producers. This has closed the gap between the two origins that opened in November. Most players have chosen to wait at the sidelines, as new January Middle East offers will be made in the coming weeks. It is unclear if buyers will accept higher prices, with sentiment poor throughout the purchasing chain. Some players did receive a noticeable increase in inquiries due to speculation over increasing price levels.

Outlook:

• Middle East January offers may be made next week

• Fundamentals not expected to fluctuate in short term

 

Polypropylene

• Prices stable

• Market slows

• Russia sells all cheap volumes

 

Turkish polypropylene (PP) prices were stable this week. Iranian raffia prices were adjusted

upwards following.

 

feedback from the market:

There has been little activity, although some purchases were made.

Most players have now stepped back from the market,having now completed their business for the year.

Russian sellers have now sold all their volumes for the year and are no longer pushing prices lower.

 

Outlook:

• Steady fundamentals seen for January

• Supply to retain length