At the polyethylene-polypropylene global industrial chain industry technology and business forum organized by IHS Markit at the end of August, analysts pointed out that due to the loss of demand growth and the successive commissioning of new capacity, the polyethylene (PE) load rate may drop to the 1980s The low level that appears. A similar situation will occur in the polypropylene (PP) market. IHS Markit predicts that from 2020 to 2022, new PE production capacity will exceed the global demand growth of 10 million tons per year. Considering that the new crown pneumonia epidemic has stifled demand growth this year, the imbalance between supply and demand in 2021 will become more serious, and this imbalance will continue at least until 2022-2023. If the supply and demand situation can develop in the way we expect, the global PE operating load rate may drop below 80%.
Nick Vafiadis, vice president of IHS Markit's plastics business, pointed out that the spread of the new crown pneumonia epidemic has almost wiped out the previously estimated global demand growth. Falling prices of crude oil and naphtha have also weakened the price advantage previously enjoyed by North American and Middle Eastern producers. Due to the weakening of production cost advantages, these manufacturers have suspended some new projects and also suspended the announced projects. At the same time, as the U.S.-China trade dispute eases day by day, the Chinese market is reopened to American PE producers, and the boom in online shopping has also pushed up the demand for PE packaging. But these new additions did not completely offset market losses. IHS Markit predicts that this year's PE demand is about 104.3 million tons, down 0.3% from 2019. Vafiadis pointed out: "In the long run, the new crown pneumonia epidemic will eventually end and energy prices will rise. However, the overcapacity before the new crown pneumonia epidemic is a structural problem, which will have an impact on the profitability of the industry for a period of time."
In the past 5 years, the global PE operating load rate has been maintained at 86%~88%. Vafiadis said: "The downward trend in load rate is expected to put pressure on prices and profit margins, and there will be no real recovery before 2023."
Joel Morales, executive director of polyolefins at IHS Markit Americas, said the polypropylene (PP) market is also facing the same trend. It is expected that 2020 will be a very challenging year because the supply far exceeds the demand, but the performance of PP prices and profit margins is much better than expected.
It is predicted that global PP demand will increase by about 4% in 2020. "The demand for PP resin is growing quite stable now, and the new capacity in China and North America is delayed by an average of 3 to 6 months." Morales said. The spread of the new crown epidemic has severely hit the auto industry, which accounts for about 10% of global PP demand. Morales said: "The overall situation of car sales and production will be the worst year. We expect the car demand in Europe and North America to drop by more than 20% from the previous month." The market is still in a transitional period, and it is expected that there will be 20 companies in 2020. The plant has a total production capacity of 6 million tons per year. By the end of this year, the market pressure is still very heavy. It is estimated that from 2020 to 2022, the new capacity of PP resin will exceed the new demand of 9.3 million tons per year. Morales pointed out that most of these new capacities are located in China. "This will put pressure on manufacturers targeting China and generate a domino effect worldwide. It is expected that the market will still face challenges in 2021."
