www.icis.com ASIA POLYMERS – Are New Global Capacities Poised to Change The Trade Dynamics? FELITA WIDJAJA SENIOR EDITOR ICIS, SINGAPORE
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www.icis.com
ASIA POLYMERS – Are
New Global Capacities
Poised to Change The
Trade Dynamics?
FELITA WIDJAJASENIOR EDITOR
ICIS, SINGAPORE
www.icis.com
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Current Asia market dynamics and price review
Capacity expansion and evolving trade flows
Asia polymers outlook hinges on China
Agenda
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SE Asia PE & PP Consumption breakdown
Source: ICIS
China
• Largest importer in the world
• Price sensitive; trader-to-trader
• Volatile futures affect buying sentiment
Southeast Asia
• Indonesia & Vietnam, fastest growing markets
• Monthly purchases on contract and spot
• Largely tracking China market
Current Asia market dynamics
• Bearish market amid ample local supply
• Exports PP and more recently, PE
• Disposable plastic ban curbs HDPE demand
India
28%
21%27%
15%
7%
2%
2017 consumption: 11.9m tonnes
Indonesia Vietnam Thailand
Malaysia Philippines Singapore
Indonesia
Thailand Vietnam
Source: ICIS supply & demand database
www.icis.com
Thailand
Current SE Asia capacities and trade flow in Asia
Thailand
Legend:Net PE & PP importers Net PE & PP exportersLargely untapped markets
China PPto SE Asia (arbitrage dependent)
Middle East and India PE & PP to SEA
SE Asia PE & PP to China
Source: ICIS Supply & Demand Database, ICIS
Malaysia
MyanmarLaos
Cambodia
Vietnam PE: 0PP: 150,000
ThailandPE: 3.75m PP: 2.3m
Malaysia PE: 1.1mPP: 400,000
SingaporePE: 2.84mPP: 1.6m
The Philippines PE: 320,000PP: 350,000
IndonesiaPE: 830,000 PP: 905,000
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Asia’s HDPE film prices supported by tighter supply
900.0
1000.0
1100.0
1200.0
1300.0
1400.0
1500.0
Ethylene vs HDPE film prices ($/tonne)
Ethylene CFR NE Asia HDPE Film CFR SE Asia HDPE Film CFR China
SE Asia prices caught up with China and rose above ethylene prices
China prices shot up above SE Asia amid tight supply; producers focussed on HDPE pipe production
China prices soften; subdued demand amid yuan depreciation and higher local inventory
SE Asia prices fell amid sales pressure, weaker China market
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Asia’s LLDPE film prices largely under pressure
900.0
1000.0
1100.0
1200.0
1300.0
1400.0
1500.0
Ethylene vs LLDPE film prices ($/tonne)
LLDPE Film CFR SE Asia LLDPE Film CFR China Ethylene CFR NE Asia
LLDPE prices not supported; buying interest curbed by healthy import supply and currency depreciation
Recent LLDPE price drops in China and SE Asia due to availability of lower-priced India origin cargoes
NE Asia ethylene prices much higher as compared to LLDPE prices
China prices depressed by ample local supply, widens price spread between SE Asia and China
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Some integrated PE producers more inclined to sell ethylene
Feedstock spread – Ethylene and HDPE SE Asia Feedstock spread – Ethylene and LLDPE SE Asia
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Asia’s PP Flat Yarn prices suppressed by longer supply
800.0
900.0
1000.0
1100.0
1200.0
1300.0
Propylene vs PP flat yarn prices ($/tonne)
PP Flat Yarn CFR China Propylene CFR NE Asia PP Flat Yarn CFR SE Asia
Persistent tight supply of import cargoes supported prices in Q1
Lengthened SE Asia supply amid recent start-ups weigh on prices
Firmer upstream monomer costs fail to support PP prices, relatively healthy margins
Source: ICIS
Muted demand and falling futures led to decline in China prices
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0
1
2
3
4
5
6
7
2016 2017 2018 2019 2020 2021
Mt/yNorth America Ethylene major capacity developments 2016-2020, by company
Braskem/Idesa CPChem Dow ChemicalEquistar ExxonMobil IndoramaOxyChem/Mexichem Westlake/Lotte SasolShell Shintech FormosaLyondellBasell INEOS
Capacity Expansion: Boom in US Shale Gas projects
2.41m tonnesin 2017
6.64m tonnesin 2018
1.67m tonnes in
2016
+2.77m tonnesto 2021
Ethylene capacity expansion
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North America to export the bulk of additional PE
Source: ICIS
2017-2018
LLDPE HDPE
Production growth 17% 6%
Local consumption growth
2% 1%
Increase in export 311% 39%
North America’s production vs consumption
Source: ICIS
1.3mtonnesin 2018
3.5m tonnesin 2017
(tonnes/yr)
LLDPE
LDPE
HDPE
2.7m tonnes
1.5m tonnes
750,000 tonnes
Supply Pressure
PE capacity
expansion
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India turns into net PE exporter after expansion
0 5000 10000 15000 20000 25000 30000 35000 40000
July'17
Sep'17
Nov'17
Jan'18
March'18
May'18
I N D I A P E E X P O R T S ( TO N N E S )
HDPE LLDPE
Source: India Customs
Saudi Arabia
20%
Singapore21%Thailand
12%UAE9%
Iran6%
US6%
India5%
Others21%
China LLDPE imports – Q1 2018
Saudi Arabia
24%
Singapore22%
Thailand13%
UAE8%
Iran5%
US4%
Others24%
China LLDPE imports – 2017
Source: ICIS
OPaL
LLDPE/HDPE: 720KtaHDPE: 340Kta
Reliance
LLDPE/HDPE: 550KtaLDPE: 400Kta
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China’s PP expansion slower than expected
Source: ICIS Supply & Demand Database
58%
8%
16%
18%
Planned:2.9m tonnes
Realised:1.9m tonnes
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Southeast Asia’s PP expansion faster than PE
Company Location CountryCapacity
(‘000 tonnes/year) Start-up
PTTGC Map Ta Phut Thailand 400 LLDPE End 2017
Lotte Chemical Titan Pasir Gudang Malaysia 200 PP July 2018
Petronas Johor Malaysia 400 HDPE, 350 LLDPE 900 PP
H1 2019End 2018/2019
Chandra Asri CilegonBanten
Indonesia 400 LLDPE/HDPE 80 PP (debottlenecking)
Early 20202019
JG Summit Batangas Philippines 250 HDPE110 PP (expansion)
2020
Nghi Son Refinery and Petrochemical
Thanh Hoa Vietnam 400 PP July 2018
Long Son Petrochemical Ba Ria-Vung Tau Vietnam 500 LLDPE, 450 HDPE400 PP
H1 2022
Source: ICIS
600kta of PP added
So far
900kta more by end 2018
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Source: ICIS Supply & Demand Database
US LLDPE needs to find a home
ME remains the biggest exporter
China remains the biggest importer
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Source: ICIS Supply & Demand Database
ME remains the biggest exporter
China less reliant on imports
Europe remains a major importer
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$34bn $34bn25% tariffs
$16bn $16bn25% tariffs
$200bn
$60bnPending
Pending
6 July
23 August
10 July
11 June$34bn
+$16bn
15 June$50bn
Tit-for-tat
3 August
Escalating US-China trade war
Ongoing battle with no clear winner might hurt
end-product market and slow down GDP growth
8 August
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China continues to build but will remain short of PE
Source: ICIS
56%
58%
60%
62%
64%
-
20000
40000
60000
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
'00
0 t
on
nes
China’s PE market
Production Consumption
Deficits Self-sufficiency percentage
(12m)(15m)
Many projects delayed to after 2020
Additional 1.85m tonnes
expected by 2019
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China expected to import more specialty grade LLDPE
Substitution trend – China LLDPE vs C6 mLLDPE
50% specialty grade
including mLLDPE
3m tonnesLLDPE imports
mLLDPEimports to reach 1.5m tonnes in
2018
Less than 100,000
tonnes of mLLDPE
7.1m tonnesLLDPE production
China import and production 2017
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China less attractive for PP imports as it nears self sufficiency
80%
82%
84%
86%
88%
90%
92%
0
10000
20000
30000
40000
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
'00
0 t
on
nes
China’s PP market
Production Consumption Deficits Self-sufficiency percentage
Close to 90% self
sufficiency
PP imports almost stagnant at below 5m
tonnes since 2015
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China crackdown on pollution – a game changer
April 2017 – China begins air pollution inspections in Beijing, Tianjin and 26 other cities in the northeast (‘2+26 Plan’)
More stringent environmental regulations have shut down chemical plants – some permanently; also relocation ordered
Some local waste plastic processors have already completed transformation or relocation of their facilities abroad
Restrictions on imports of waste plastics announced in July 2017, total ban from 2019
Estimates of around 2m tonnes of additional demand for virgin PE and 1m of virgin PP
Imports (Unit: tonne) 2017 2018 Waste and scraps of polyethylene
2,339,770 19,413
Waste and scraps of other plastics, excluding discarded compact disks
1,542,440 17,036
Image credit: Rex Shutterstock
China waste plastics imports quota (2017-2018)
Source: China's Ministry of Environmental Protection
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Challenges in polymers market
More supply options amid rapid capacity expansion
Growing environmental concern on plastic trash
Ban and restriction on usage of plastic bags and single-use plastics weaken end-product demand
Big brands eliminate drink straws
Pay for shopping bags
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Asia’s polymers market recap
Supply
• Growing US PE and Asia PP capacities to add on to supply pressure
• India anticipated to increase export PE volumes
• Integrated PE producers might continue to sell ethylene amid weak PE outlook
Demand
• Import demand hinges on currency developments
• Additional tariffs on US PE imports might boost demand for other origins in China
• Buyers refrain from buying long shipment cargoes amid uncertainty on US-China trade war
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Possible scenarios in polymers market moving forward
$1 = CNY6.84
Surplus supply due to displacement
Saudi Arabia
Iran
UAE
Oman
KuwaitQatar
Global pricing and margins
under pressure
Impact of China’s 25% tariffs on US cargoes
US PE and PP not in demand amid additional tariffs in China
US PE directed to other markets,
including SE Asia
Local Asian currencies continue to depreciate against strong USD
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ICIS PE/PP team
Middle East/South Asia
Veena Pathare
Asia Pacific
Felita Widjaja (PE)
Leanne Tan (PP)
Turkey, Africa
Ben Lake
Europe
Linda Naylor
US
Zachary Moore
China
Angie Li (PE)
Dora Xue (PP)
Muhamad Fadhil
Head of Middle East Markets
John Richardson
Senior Consultant
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