Global PE market faces ‘most formidable set of issues,' PP keeps rolling

Houston — The global polyethylene resin market might be facing more challenges than the polypropylene market is — at least in the short term.

"Global polyethylene is groping with the most formidable set of issues ever," IHS Markit analyst Nick Vafiadis said at the Global Plastics Summit, June 4-6 in Houston.

The PE market "could move from robust to having excess supply," he added. "The global economy is slowing down, and PE demand is closely linked to GDP."

Global PE capacity growth also could overwhelm demand, according to Vafiadis. A global PE surplus that was less than 4 billion pounds in 2017-18 could grow to almost 18 billion pounds in 2020-23, he added.

That amount "would be a record overhang, which could have an impact on prices, operating rates and [profit] margins," Vafiadis said.

In the U.S., the wave of new capacity fueled by shale gas "is cresting" this year, with additions from Sasol, Formosa Plastics, ExxonMobil and LyondellBasell. Global PE operating rates also are expected to peak in 2019 before declining through 2023. At that point, linear low density PE will be in the greatest oversupply.

The global PP market is less dramatic, with improving supply expected to support healthy demand, according to Joel Morales of IHS Markit.

"Polypropylene remains competitively priced with most resins," he said. "And we've been amazed at how quickly [a] new plant can be built."

Morales added that near- to mid-term capacity additions have made up for recent production shortfalls, with "capacity chasing profitability" in places like China, Russia, Vietnam, the Philippines and Poland.

PP demand growth is focused on Asia, with global operating rates "coming off-peak but still balanced."

Global PP demand growth is expected to average 4.3 percent per year in 2019-23, down slightly from the 5.5 percent that had been seen from 2014-18.

In the U.S., near-term PP capacity additions are expected from LyondellBasell (almost 200 million pounds), Braskem (almost 1 billion pounds) and Formosa Plastics (more than 500 million pounds).