Rob Stier, senior head of petrochemicals at S&P Global Platts Analytics, said recently: "Polyethylene prices in the Global market in 2021 will come under pressure as production returns to the market, supply increases and demand is unlikely to recover strongly in the near term." In addition to the resumption of normal production of polyethylene plants in southwest Louisiana and southeast Texas, a large amount of new polyethylene production capacity in Asia stands ready to come on stream. On the demand side, although global demand for polyethylene remained resilient to a large extent during the epidemic, overall demand is expected to remain weak relative to pre-epidemic levels as most regions are still not completely free of the epidemic.
Asian demand hits the pause button
In Asia, about 5m mMTpy of new polyethylene capacity will come on stream by the end of 2021, although some may be delayed. While new capacity could create an oversupply in the market, the source said the idling of inefficient old units and a drop in the level of global polyethylene plant utilisation could balance the market.
Sources expect demand growth for polyethylene in Asia to stall in the first half of 2021. However, demand for polyethylene is expected to increase by 4m tonnes for all of 2021, according to S&P Global Platts. Platts analysis company (Platts Analytics), said the 2021 Asian polyethylene demand is expected to reach about 61 million tons/year, under the demand data, is expected to 2021 Asian polyethylene production shortfall of 18 million tons, the production of high density polyethylene (HDPE) gap of more than 8 million tons, linear low density polyethylene (LLDPE) production shortfall of 6 million tons, low density polyethylene (LDPE) production shortfall of 4 million tons.
Demand for polyethylene is expected to remain strong in the Asian packaging, consumer and healthcare markets next year. However, demand for polyethylene in other sectors is likely to remain weak amid falling exports of manufactured goods and cash flow problems, making the overall pace of recovery in polyethylene demand next year uncertain. Traders said that economic stimulus measures from governments were waning and that demand for finished plastic imports from Europe and the US was unlikely to recover early next year. Demand will not return to normal until the third quarter of next year at the earliest.
The outlook for the US market remains uncertain
Us polyethylene market participants expect prices to weaken in the short term as more coronavirus related closures or restrictions affect the economy. "It's hard to pinpoint, but I think in the New Year we will continue to lower prices for polyethylene products and start exporting heavily overseas again to ease the domestic supply glut," said one polyethylene export supplier.
After repeated delays, Sasol of South Africa and Formosa Plastics USA finally started production on their US-BASED LDPE units in the fourth quarter and plan to boost polyethylene exports across the board in the first half of next year. Together, these two LDPE units will increase production capacity by 820,000 tons/year. U.S. polyethylene prices and profit margins are expected to come under pressure as the United States seeks to address excess domestic supply and compete in foreign markets, the source said. "The US will return to being a major exporter of polyethylene and will have to lower prices to sell it internationally," platts' Mr Steel said.
U.S. polyethylene producers are also expected to increase production next year, market analysts say, while domestic demand shows no sign of recovering anytime soon and overseas markets are under competitive pressure. Under such circumstances, US polyethylene margins will still fall.
Weak demand in Europe and tight supply
The European polyethylene market is expected to be countered by weak demand and tighter supply expectations next year, with polyethylene prices expected to remain stable. Downstream polyethylene processors and some traders believe that demand for polyethylene will weaken in anticipation of a second wave of containment measures, rising unemployment and worsening macroeconomic conditions, leading to greater discounts on polyethylene prices.
Meanwhile, long-term damage from a hurricane in August continues to limit polyethylene production and exports. European producers fill the gap by exporting polyethylene to Asia, Latin America and Turkey. Reduced supply in Europe and net export earnings that are more attractive to these markets allow domestic producers to maintain exports at better prices than at home, further tightening the supply of polyethylene in the European market. Still, market sources acknowledge that European prices are already among the lowest in the world and cannot go any lower.