Petrotahlil --North American polyethylene (PE) producers saw stronger demand amid the coronavirus crisis than producers of many other chemicals and resins, Zachary Moore, ICIS deputy managing editor, said on Thursday.
Moore was speaking during a webinar, “ICIS North American Chemical Markets Forum - Looking Ahead: How will polymer markets evolve in H2?"
During the pandemic, consumers came to appreciate the sanitary value of plastics packaging - to the benefit of PE, which goes into packaging for food and other non-durable consumer goods.
Also, export activity came back strongly after dropping off for a while, Moore said.
Since 2019, North American PE producers export just over 50% of their production, meaning that PE has become export-focused.
Much of the export activity is linked to China. As such, a worsening in US-China trade relations could affect producers, Moore said.
Domestically, Moore noted a PE price increase initiative for June.
Meanwhile, on the cost side he noted significant increases in prices for ethane – the feedstock used in most of US ethylene production – because of lower supplies.
Much of ethane is recovered as associated gas from shale oil and gas production. As oil prices and demand fell during the crisis, energy companies cut drilling activity, thus reducing ethane availability, he explained.
James Ray, ICIS vice president of consulting, said that with the overall huge demand decline in the economy one would have expected PE inventories to rise.
However, that was not the case. Instead, ICIS data for April showed a decline in PE inventories of more than 5% - indicating that there is no huge imbalance in the PE market.
Major US producers of PE include Chevron Phillips Chemical (CP Chem), Dow, LyondellBasell, ExxonMobil, Formosa, INEOS, Total Petrochemicals and Westlake.
Polypropylene (PP) had a good start in 2020, right into March, Moore said.
Then, in April, “things started getting a little haywire”, with sales off 11% year on year, he said.
As was the case in PE for packaging, PP saw demand increases in certain segments during the health crisis – for example in applications for face masks or medical gowns, he said.
On the other hand, PP demand from the automotive sector was down “quite significantly” due to the demand decline and plant shutdowns in the auto sector, he said.
Demand for PP going into consumer products is also down.
Going forward, PP demand will depend on how consumers will spend and behave in the aftermath of the pandemic, he said.
Even with the coronavirus restrictions being eased or lifted, consumers may prefer to stay home and not spend, he said.
In terms of supply, US PP will be a bit longer this year because of capacity debottlenecking last year and the expected startup of Braskem’s PP plant in Texas in Q3 this year, he said.
As a result, US PP producers will likely ship more product into export markets, he said.
Major US PP producers include Braskem, ExxonMobil, Formosa, INEOS, LyondellBasell, Phillips 66 and Total Petrochemicals.