Affected by rising market supply and rising raw material costs, global polyethylene producers' profit margins fell sharply in the second quarter of this year, and the profitability of some integrated petrochemical giants was affected. Especially in the US, polyethylene production The device profit margin has fallen sharply from the abnormally high level a few years ago, and may continue to decline, as a large number of new capacity is built and put into production.
Market participants pointed out that the supply of ethane, ethylene and polyethylene will be over-represented in the second half of this year to next year. Global polyethylene producers face greater challenges. It can be said that the industry's 'cold winter' has arrived.
Recently, the profit margin of polyethylene plant production with ethane has dropped sharply. ICIS data shows that in the second quarter of this year, the profit margin of high-density polyethylene (HDPE) produced by ethane in the United States was significantly higher than that in the first quarter. After falling 50.6%, the production profit margin of low-density polyethylene (LDPE) fell sharply by 48.2%. Compared with the same period of last year, the profit margin of HDPE production fell sharply by 55.4%, and the profit margin of LDPE production also dropped by 54.4%.
In contrast, the profit margin of polyethylene production from northeast Asia and northwestern Europe is lower. In the second quarter, the profit margin of HDPE production in Northeast Asia decreased by 25.1%, down 35.8% year-on-year; LDPE production The profit margin decreased by 34.6% from the previous month and decreased by 48%. The profit margin of HDPE in Northwest Europe decreased by 14.5% from the previous month and decreased by 45.2%. The profit margin of LDPE decreased by 15.4% from the previous month and decreased by 42.1%.
Since May, the losses of LDPE production in the comprehensive enterprises with naphtha as raw materials in Northeast Asia have increased significantly. For LDPE and HDPE, the loss of polymer devices is much larger than that in the fourth quarter of 2017.
Between 2015 and 2017, European manufacturers of LDPE and HDPE based on naphtha have enjoyed high profit margins, but in 2018, profit margins have been declining. The recent high point was in the second quarter of last year, although The profit margin in the first quarter of this year has rebounded, but it has started to decline in the second quarter.
Paul Hodges, chairman of International eChem, a world-renowned consulting firm, believes that price wars or full-scale launches are another factor that has led to a decline in the profitability of polyethylene producers. Because tariffs between the US and China may trigger a global The price war of polyethylene, when the new round of polyethylene expansion in the United States will produce new products, most likely to be in the European market. European polyethylene producers are preparing for fierce competition from their American counterparts.
Paul Hodges said that although the European market is not a logical export market for US polyethylene, if the Sino-US trade dispute deteriorates, it will become difficult for US polyethylene to export to the Chinese market. In this case, the European market will become The preferred market for US polyethylene exports. According to industry insiders, Chinese traders are already preparing to reduce US polyethylene exports.
The price of polyethylene in the European market is relatively low, so it is not very attractive under normal circumstances. However, if the Sino-US trade dispute escalates to a large surplus of domestic polyethylene supply in the United States, US producers can only export surplus products to Europe. The market, and can only choose to export to the European market in the form of price wars, because the cost advantage of the US ethane-based polyethylene producers is relatively large. As of now, exports from the United States have had little impact on the European HDPE market. It is expected that the impact will be obvious in the fourth quarter.
Before the end of next year, North America will add 6.5 million tons/year of polyethylene capacity, an increase of 42% compared with current capacity. By 2022, US polyethylene capacity will further increase, with an increase of 77%. It is expected that exports from the United States will have an impact on global market prices. For those naphtha-based polyethylene producers that have already lost their profits due to raw material costs in the rising oil price environment, the challenge is even greater, especially in the situation.