China LDPE and LLDPE Demand Will Witness Negative Growth of 8-10 Percent In 2022

The rumour regarding China's bounce back in the global polyolefins market caused excitement as its demand and pricing were finally recovering. However, the sentiments remain inconclusive as the ICIS'S pricing assessments are still awaited, guiding the movement of the essential market in the world.

In the week ending August 12, 2022, no hints of recovery were noticed. Still, according to the Asia Pacific polyethylene (PE) report, during this week, the PE import talks in China were quashed as various traders were disinterested in the US dollar-denominated shipments on frail local yuan costs.

Despite prices increasing in the recent trading week, it is uncertain whether the factor responsible is strong demand or weak supply.

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This year the total refinery runs in China have lowered significantly by record-high margins, according to the US-based Rhodium Group report. But even the reduced demand is acceptable as China decreased fuel exports this year to secure stable and low energy prices domestically.

The reason might be low feedstock availability in domestic refineries for propylene, PE, ethylene, and polypropylene (PP) production. This may explain the budget cuts in Chinese PE and PP operating costs. Another reason can be frail polyolefins profitability.

LDPE Demand in China Could Dip By 8 Percent During the Current Year, With Net Imports Lowering By 500,000 Tonnes Producers don't mind overlooking high naphtha prices in 2022, contrary to polypropylene (PP) and high-density polyethylene (HDPE). In China, till June of 2022, the spreads of CFR (cost & freight) low-density polyethylene (LDPE) over CFR Japan naphtha costs have withheld well. The monthly spread on average during January 2000-December 2021 was USD 599 per tonne. From January to June of 2022, it was USD 588 per tonne.

The Recent Stimulus in China Will Aid the Economy; However, It is Doubtful That It Is Enough to Recover the Olefins Demand.

The latest stimulus introduced by the government in China is not likely to aid the existing dwindling demand for polyolefins and olefins due to the upcoming inflation fears as well as limited plans to manage it. Each additional stimulus accounts for the consumer's disposable wages and promotes increased expenditure, thus resulting in the rise of inflation proportionately, which will negatively impact the sentiments of Chinese policymakers.

In a quest to accelerate the economy, the State Council of China’s cabinet put aside a new amount as credit support from institutions controlled by the government and policy banks. Based on channelling the amount of Yuan 300 billion (around USD 43.87 billion) for certain projects, the quota of similar instruments is to be raised to more than Yuan 300 billion.

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The goal set for October end is to utilise the Yuan 500 billion (USD 70,907,900,000.00) worth of special-purpose bond quota. This will propel the effective investment, stimulate consumption as well as counter the issue of inadequate loan demand.

As per Procurement Resource, the polymer market’s recovery and set budgets by the Chinese government will aid the economy’s recovery.