According to ICIS data, the South-east Asia polyethylene market may face oversupply in the second half of the year due to weakening demand for imported products in the region and the impact of the US-China trade war on global PE trade volume.
As a response to the U.S. government’s tariff collection on US$50 billion of Chinese imports, the Chinese Ministry of Commerce decided to increase tariffs on U.S. related products (including PE) by 25%. China is the world’s largest importer of PE, and this decision must be made. Will affect the global PE trade flow.
In recent years, the United States has built up a large amount of PE capacity to meet China's huge market demand. As soon as these new production capacity are put into production, the trade war between China and the United States broke out. Southeast Asia as another major purchasing area of US PE will hardly absorb more of the US Supply.
According to statistics, the new ethylene project in the United States is expected to increase the PE production capacity by 5 million tons/year. At present, China mainly imports PE goods from Asia and the Middle East. In 2017, the United States was the sixth largest source of PE. In the first half of the year, the United States produced PE goods. The amount of goods entering the Asian market is not much, and more US PE goods were originally planned to be traded in Asia in the second half of the year. Any change in trade flow will challenge US suppliers in the short term because they need to change their basic logistics and Distribution channels to transfer goods to other markets.
The outbreak of Sino-US trade war will cause US PEs to enter China, and Middle East PE suppliers will take this opportunity to supply more goods to China. As the Middle East is the main source of PE supply in Southeast Asia, it means the Middle East to Southeast Asia market. The amount of PE exported will be reduced.
On the contrary, the United States will have more PE products entering Southeast Asia. The local price of PE in Thailand is more competitive than imported products. Thai traders are not keen on imports. Only plastic processors who need special properties import a small amount of PE. For Malaysia and Indonesia, for the main, since mid-May, market activity has slowed due to Muslim Ramadan.
Affected by the increase in supply and weak demand, some market participants expect PE prices in Southeast Asia to fall slightly from June to August. It is expected that the restocking activity will start at the end of the third quarter.
ICIS data shows that at the beginning of June, the average HDPE film price was US$1,395/tonne (CFR, Southeast Asia), while the linear low-density polyethylene (LLDPE) and low-density polyethylene (LDPE) film grades. The prices were US$1210/tonne and US$1265/tonne, respectively. In the first quarter, several manufacturers in the region conducted inspections in March, which caused the supplier's inventory to turn tight and PE prices soared. During this period, the Middle East and Saudi Arabia continued to rise. Production failures and production stoppages have also limited the supply of PE exports to Southeast Asia. As some PE producers in the Middle East and Asia focus on HDPE pipe grade production, market demand for these products is stronger, resulting in the supply of HDPE film grade resins. Especially nervous.
Although current PE prices have continued to rise steadily and steadily, the upward trend in prices of most PE products in the second quarter could not continue. In most of the second quarter, the depreciation of local currencies in Southeast Asia against the US dollar also restrained the overall demand for imports. Weakening makes it more expensive to import US dollars denominated in PE.
The strong upward trend began to weaken. Affected by the weakening of downstream polypropylene plant demand, China's propylene market has been weakening. However, due to the expected tighter supply in the Asian market, the downward pressure on propylene prices in the region may be temporary. of.