As the U.S. polyethylene resin market approaches a 50 percent export rate, let's check in with the always insightful John Richardson.
Richardson, a market analyst with ICIS, pointed out in a recent blog post that U.S. exports of high density PE to China more than tripled in 2023, surging from less than 500 million pounds to almost 1.7 billion pounds.
At the same time, Chinese imports of HDPE from Saudi Arabia fell 13 percent, with United Arab Emirates down 23 percent, Iran down 38 percent and South Korea down 13 percent in that category.
Richardson said market trends favoring the U.S. were similar for low and linear low density PE. But he added this geopolitical mix might be short-lived, even though the trend of higher U.S. PE exports to China continued in the first half of 2024.
"I believe we are entering a world where geopolitics will be an important shaper of export and import flows in HDPE and other chemicals and polymers," Richardson wrote.
"If the U.S.-China geopolitical split continues, this raises the question of where China will in future source most of its petrochemical import volumes," he said.
"Will the Middle East become a more favored partner regardless of cost-per-ton economics?" he asked, adding that recent natural-gas liquid discoveries in Saudi Arabia suggest that country's feedstock-cost position might improve.
Like many good writers and reporters, Richardson knows the value of a provocative headline. As a result, he titled another recent blog post: "Stop wasting time waiting for the end of the downcycle."
In that post, he lists 10 "interconnected forces shaping the new chemicals landscape." On that list, he describes China as "the immediate center of the crisis" for the global chemicals industry because global capacity was added on assumptions of Chinese chemicals demand growing 6-8 percent per year. It's now expected to be much lower, even possibly going negative.
Another item on Richardson's list is that geopolitics mean that we're likely to see a change in chemicals trade flows.
"A bipolar world — one centered on China and its allies and the other on the U.S. and its allies — is one outcome," he wrote. "Another is an even more fragmented and de-globalized world with many national and regional markets."
Richardson also includes an item saying that oil and gas majors could end up dominating chemicals to compensate for declining oil demand due to electric vehicles (EVs) and fuel efficiency, as China moves to chemicals self-sufficiency by itself and/or with imports only from its geopolitical partners in the Middle East.
"Will the growth in EVs continue when the full life-cycle implications of EVs become apparent?" he asked. "And how will the weight of the incumbents in the old transportation value chains shape outcomes?"
The answers to these and other questions important to global plastics markets will be answered in the months and years ahead. As always, it's a good idea to expect the unexpected.