68
ICIS Asia Polyolefins Seminar ICIS presentations during Chinaplas 2019 | 23 May 2019 Zachary Moore Deputy Managing Editor Veena Pathare Senior Editor Manager ICIS
ICIS Asia Polyolefins Seminar
ICIS presentations during Chinaplas 2019 | 23 May 2019
Zachary Moore
Deputy Managing Editor
Veena Pathare
Senior Editor Manager
ICIS
The US shale boom and its impact on global PE and PP markets
Asian and Middle Eastern polymer markets brace for shifting trade flows
Agenda
The US shale boom and its ramifications for global PE and PP markets
23 May 2019
Zachary Moore
Deputy Managing Editor Americas
ICIS Editorial
Chinaplas 2019
Agenda
US shale oil boom and its impact on the ethylene market
US cracker and PE projects
Overview of US exports
Impact of shale oil on the propylene chain
US propylene PP projects
US PP importexport dynamics
Shale oil drives US ethylene advantage
Shale Oil
Shale oilmdashGame changer for US energy
bull Lower 48 crude oil production up around 155 over last ten years
bull US surpasses Saudi Arabia as largest oil producing country
bull US may transition from net importer to net exporter of energy
Associated gasesmdashthe petrochemical game changer
Imported Ethane costs are representative of purchasing Ethane FOB Mt BV USG and shipped to Destination includes Liquefaction amp Handling Costs
Abundant NGL supplies give the US the worldrsquos lowest cost ethylene production
The US ethylene advantage
Abundant US ethanemdashcan be flared on sold as a cracker feedstock
US ethane crackers produce ethylene at a considerable cash cost advantage relative to naphtha crackers
Ethylene is difficult to exportmdashUS producers are moving to capture the advantage by exporting derivatives
US cracker feedslates
Ethane is consistently the cheapest available feed
Many new crackers are ethane only older crackers have feedstock flexibility
Some new crackers lack infrastructure to store co-products and re-route them to the feed
Propane and butane are sometimes preferred when cracker operators seek to maximize co-product production
Expansions of USGC NGL fractionation
Company Capacity (bblday) Location StatusStart-Up
Phillips 66 150000 Brazoria County Texas Late 2020
Phillips 66 150000 Brazoria County Texas Late 2020
Enterprise 150000 Mont Belvieu Texas Q1 2020
ONEOK 125000 Mont Belvieu Texas Q1 2021
Targa 110000 Mont Belvieu Texas Q1 2020
Targa 110000 Mont Belvieu Texas Q2 2020
Energy Transfer (Lone Star) 150000 Mont Belvieu Texas Q1 2020
Expansions = 945000 bblday
New US crackers complete under construction through 2019
CompanyC2 capacity
(ktyear)Downstream (ktyear) Location Start-Up
OxyChemMexichem 544 Feed existing VCM plant of 1050 Ingleside Texas Q1 2017
Dow Chemical 1500ELITE PE (400) LDPE (350) ndash Plaquemine Louisiana EPDM (200) elastomers (320)
Freeport Texas Q3 2017
Chevron Phillips Chemical 1725Bimodal HDPE (500) mLLDPE (500) both at Old Ocean
Cedar Bayou Texas Q1 2018
ExxonMobil Chemical 1500mLLDPE plus LLDPE (650 x2) at Mont Belvieu
Baytown Texas Q3 2018
LotteWestlake 1000MEG (760) by Lotte feed into existing PVC for Westlake
St Charles Louisiana H1 2019
Shintech 500 VCM (400) PVC (290) caustic soda (270) Plaquemine Louisiana H1 2019
Formosa Plastics 1200 HDPE (400) LDPE (400) EG (800) Point Comfort Texas H2 2019
Sasol 1500LLDPE (470) LDPE (420) EOEG (300250) ethoxylates detergent alcohols (300)
Lake Charles Louisiana H2 2019
8 new crackers from 2017-2019 = 94m tonnesyear
Expansions of existing US crackers plus 1 restart
Company Capacity (ktyear) Location StatusStart-Up
LyondellBasell 363 Corpus Christi Texas Fully started up Q2 2017
Westlake Chemical 32 Calvert City Kentucky Started up Apr 2017
Indorama (restart) 440 Lake Charles Louisiana May 2019
Dow 91 Orange Texas H1 2019
Dow 500 Freeport Texas 2020
INEOS 270 Chocolate Bayou Texas 2020
LyondellBasell 250 Channelview Texas Evaluating for 2020s
Expansions about 14m tonnesyear + new crackers 94m = 108m or over 35 of existing US capacity by 2019
North America PE expansions
Company Capacity (ktyear) Grade breakdown Location Start-Up
Dow Chemical 400 ELITE PE Freeport Texas Q3 2017
Dow Chemical 350 LDPE Plaquemine Lousiana Q4 2017
Chevron Phillips Chemical 1000 Bimodal HDPE (500) mLLDPE (500) Old Ocean Texas Q3 2017
ExxonMobil Chemical 1300 mLLDPE plus LLDPE (2 x 650) Mont Belvieu Texas Q4 2017
INEOSSasol 470 HDPE La Porte Texas Q4 2017
Dow Chemical 125 Bimodal HDPE St Charles Louisiana Q4 2018
Sasol 890 LLDPE (470) LDPE (420) Lake Charles Louisiana Q1 2019 Q3 2019
LyondellBasell 500 HDPE La Porte Texas Q3 2019
Formosa Plastics 800 HDPE (400) LDPE (400) Point Comfort Texas H2 2019
ExxonMobil Chemical 650 LLDPE Beaumont Texas 2019
TotalBorealisNOVA 625 Borstar PE Bayport Texas 2021
Shell 1600 HDPELLDPE (2x 550) HDPE (500) Monaca Pennsylvania Early 2020s
PTT Global Chemicals 700 HDPE (2x 350) Belmont County Ohio NA
NOVA Chemicals 430 LLDPE Sarnia Canada 2022
SABICExxonMobil NA PE unspec (2 units) Corpus Christi Texas H1 2022
Dow Chemical 600 PE (unspec) US Gulf Coast 2021-2023
Dow Chemical 350 PE (unspec) US global debottlenecks 2021-2023
Through 2019 = 65m tonnesyear (+39 US capacity)Through 2022 = 121m tonnesyear (+74 US capacity)
Assuming 1300kt PE for SABICExxonMobil
2nd wave of new US cracker projects
CompanyCapacity (ktyear)
Downstream (ktyear)
Location Start-up Status
TotalBorealisNOVA
1000Borstar PE (625) + existing PE (400)
Port Arthur Texas End 2020Under
construction
Shell 1500HDPELLDPE (2x 550)
HDPE (500)Monaca
PennsylvaniaEarly 2020s
Underconstruction
SABICExxonMobil
1800 PE (2 units) MEGCorpus Christi
TexasH1 2022
Underconstruction
PTTGCDaelim 1000HDPE (700) MEG (500) EO (100)
Belmont County Ohio
NA Evaluation
Formosa Petrochemicals
1200LLDPE (400) HDPE
(400) EG (900)St James Parish
Louisiana2022 Evaluation
Chevron Phillips Chemical
NA NA US Gulf Coast NAFID late 2019
early 2020
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
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Support your daily trading activities with unbiased price assessments and commentary on price movements
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bull Import and export spot and contract prices
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bull Commentary on supplydemand trading
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as changes in government policies
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Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
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bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
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bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
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Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
The US shale boom and its impact on global PE and PP markets
Asian and Middle Eastern polymer markets brace for shifting trade flows
Agenda
The US shale boom and its ramifications for global PE and PP markets
23 May 2019
Zachary Moore
Deputy Managing Editor Americas
ICIS Editorial
Chinaplas 2019
Agenda
US shale oil boom and its impact on the ethylene market
US cracker and PE projects
Overview of US exports
Impact of shale oil on the propylene chain
US propylene PP projects
US PP importexport dynamics
Shale oil drives US ethylene advantage
Shale Oil
Shale oilmdashGame changer for US energy
bull Lower 48 crude oil production up around 155 over last ten years
bull US surpasses Saudi Arabia as largest oil producing country
bull US may transition from net importer to net exporter of energy
Associated gasesmdashthe petrochemical game changer
Imported Ethane costs are representative of purchasing Ethane FOB Mt BV USG and shipped to Destination includes Liquefaction amp Handling Costs
Abundant NGL supplies give the US the worldrsquos lowest cost ethylene production
The US ethylene advantage
Abundant US ethanemdashcan be flared on sold as a cracker feedstock
US ethane crackers produce ethylene at a considerable cash cost advantage relative to naphtha crackers
Ethylene is difficult to exportmdashUS producers are moving to capture the advantage by exporting derivatives
US cracker feedslates
Ethane is consistently the cheapest available feed
Many new crackers are ethane only older crackers have feedstock flexibility
Some new crackers lack infrastructure to store co-products and re-route them to the feed
Propane and butane are sometimes preferred when cracker operators seek to maximize co-product production
Expansions of USGC NGL fractionation
Company Capacity (bblday) Location StatusStart-Up
Phillips 66 150000 Brazoria County Texas Late 2020
Phillips 66 150000 Brazoria County Texas Late 2020
Enterprise 150000 Mont Belvieu Texas Q1 2020
ONEOK 125000 Mont Belvieu Texas Q1 2021
Targa 110000 Mont Belvieu Texas Q1 2020
Targa 110000 Mont Belvieu Texas Q2 2020
Energy Transfer (Lone Star) 150000 Mont Belvieu Texas Q1 2020
Expansions = 945000 bblday
New US crackers complete under construction through 2019
CompanyC2 capacity
(ktyear)Downstream (ktyear) Location Start-Up
OxyChemMexichem 544 Feed existing VCM plant of 1050 Ingleside Texas Q1 2017
Dow Chemical 1500ELITE PE (400) LDPE (350) ndash Plaquemine Louisiana EPDM (200) elastomers (320)
Freeport Texas Q3 2017
Chevron Phillips Chemical 1725Bimodal HDPE (500) mLLDPE (500) both at Old Ocean
Cedar Bayou Texas Q1 2018
ExxonMobil Chemical 1500mLLDPE plus LLDPE (650 x2) at Mont Belvieu
Baytown Texas Q3 2018
LotteWestlake 1000MEG (760) by Lotte feed into existing PVC for Westlake
St Charles Louisiana H1 2019
Shintech 500 VCM (400) PVC (290) caustic soda (270) Plaquemine Louisiana H1 2019
Formosa Plastics 1200 HDPE (400) LDPE (400) EG (800) Point Comfort Texas H2 2019
Sasol 1500LLDPE (470) LDPE (420) EOEG (300250) ethoxylates detergent alcohols (300)
Lake Charles Louisiana H2 2019
8 new crackers from 2017-2019 = 94m tonnesyear
Expansions of existing US crackers plus 1 restart
Company Capacity (ktyear) Location StatusStart-Up
LyondellBasell 363 Corpus Christi Texas Fully started up Q2 2017
Westlake Chemical 32 Calvert City Kentucky Started up Apr 2017
Indorama (restart) 440 Lake Charles Louisiana May 2019
Dow 91 Orange Texas H1 2019
Dow 500 Freeport Texas 2020
INEOS 270 Chocolate Bayou Texas 2020
LyondellBasell 250 Channelview Texas Evaluating for 2020s
Expansions about 14m tonnesyear + new crackers 94m = 108m or over 35 of existing US capacity by 2019
North America PE expansions
Company Capacity (ktyear) Grade breakdown Location Start-Up
Dow Chemical 400 ELITE PE Freeport Texas Q3 2017
Dow Chemical 350 LDPE Plaquemine Lousiana Q4 2017
Chevron Phillips Chemical 1000 Bimodal HDPE (500) mLLDPE (500) Old Ocean Texas Q3 2017
ExxonMobil Chemical 1300 mLLDPE plus LLDPE (2 x 650) Mont Belvieu Texas Q4 2017
INEOSSasol 470 HDPE La Porte Texas Q4 2017
Dow Chemical 125 Bimodal HDPE St Charles Louisiana Q4 2018
Sasol 890 LLDPE (470) LDPE (420) Lake Charles Louisiana Q1 2019 Q3 2019
LyondellBasell 500 HDPE La Porte Texas Q3 2019
Formosa Plastics 800 HDPE (400) LDPE (400) Point Comfort Texas H2 2019
ExxonMobil Chemical 650 LLDPE Beaumont Texas 2019
TotalBorealisNOVA 625 Borstar PE Bayport Texas 2021
Shell 1600 HDPELLDPE (2x 550) HDPE (500) Monaca Pennsylvania Early 2020s
PTT Global Chemicals 700 HDPE (2x 350) Belmont County Ohio NA
NOVA Chemicals 430 LLDPE Sarnia Canada 2022
SABICExxonMobil NA PE unspec (2 units) Corpus Christi Texas H1 2022
Dow Chemical 600 PE (unspec) US Gulf Coast 2021-2023
Dow Chemical 350 PE (unspec) US global debottlenecks 2021-2023
Through 2019 = 65m tonnesyear (+39 US capacity)Through 2022 = 121m tonnesyear (+74 US capacity)
Assuming 1300kt PE for SABICExxonMobil
2nd wave of new US cracker projects
CompanyCapacity (ktyear)
Downstream (ktyear)
Location Start-up Status
TotalBorealisNOVA
1000Borstar PE (625) + existing PE (400)
Port Arthur Texas End 2020Under
construction
Shell 1500HDPELLDPE (2x 550)
HDPE (500)Monaca
PennsylvaniaEarly 2020s
Underconstruction
SABICExxonMobil
1800 PE (2 units) MEGCorpus Christi
TexasH1 2022
Underconstruction
PTTGCDaelim 1000HDPE (700) MEG (500) EO (100)
Belmont County Ohio
NA Evaluation
Formosa Petrochemicals
1200LLDPE (400) HDPE
(400) EG (900)St James Parish
Louisiana2022 Evaluation
Chevron Phillips Chemical
NA NA US Gulf Coast NAFID late 2019
early 2020
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
The US shale boom and its ramifications for global PE and PP markets
23 May 2019
Zachary Moore
Deputy Managing Editor Americas
ICIS Editorial
Chinaplas 2019
Agenda
US shale oil boom and its impact on the ethylene market
US cracker and PE projects
Overview of US exports
Impact of shale oil on the propylene chain
US propylene PP projects
US PP importexport dynamics
Shale oil drives US ethylene advantage
Shale Oil
Shale oilmdashGame changer for US energy
bull Lower 48 crude oil production up around 155 over last ten years
bull US surpasses Saudi Arabia as largest oil producing country
bull US may transition from net importer to net exporter of energy
Associated gasesmdashthe petrochemical game changer
Imported Ethane costs are representative of purchasing Ethane FOB Mt BV USG and shipped to Destination includes Liquefaction amp Handling Costs
Abundant NGL supplies give the US the worldrsquos lowest cost ethylene production
The US ethylene advantage
Abundant US ethanemdashcan be flared on sold as a cracker feedstock
US ethane crackers produce ethylene at a considerable cash cost advantage relative to naphtha crackers
Ethylene is difficult to exportmdashUS producers are moving to capture the advantage by exporting derivatives
US cracker feedslates
Ethane is consistently the cheapest available feed
Many new crackers are ethane only older crackers have feedstock flexibility
Some new crackers lack infrastructure to store co-products and re-route them to the feed
Propane and butane are sometimes preferred when cracker operators seek to maximize co-product production
Expansions of USGC NGL fractionation
Company Capacity (bblday) Location StatusStart-Up
Phillips 66 150000 Brazoria County Texas Late 2020
Phillips 66 150000 Brazoria County Texas Late 2020
Enterprise 150000 Mont Belvieu Texas Q1 2020
ONEOK 125000 Mont Belvieu Texas Q1 2021
Targa 110000 Mont Belvieu Texas Q1 2020
Targa 110000 Mont Belvieu Texas Q2 2020
Energy Transfer (Lone Star) 150000 Mont Belvieu Texas Q1 2020
Expansions = 945000 bblday
New US crackers complete under construction through 2019
CompanyC2 capacity
(ktyear)Downstream (ktyear) Location Start-Up
OxyChemMexichem 544 Feed existing VCM plant of 1050 Ingleside Texas Q1 2017
Dow Chemical 1500ELITE PE (400) LDPE (350) ndash Plaquemine Louisiana EPDM (200) elastomers (320)
Freeport Texas Q3 2017
Chevron Phillips Chemical 1725Bimodal HDPE (500) mLLDPE (500) both at Old Ocean
Cedar Bayou Texas Q1 2018
ExxonMobil Chemical 1500mLLDPE plus LLDPE (650 x2) at Mont Belvieu
Baytown Texas Q3 2018
LotteWestlake 1000MEG (760) by Lotte feed into existing PVC for Westlake
St Charles Louisiana H1 2019
Shintech 500 VCM (400) PVC (290) caustic soda (270) Plaquemine Louisiana H1 2019
Formosa Plastics 1200 HDPE (400) LDPE (400) EG (800) Point Comfort Texas H2 2019
Sasol 1500LLDPE (470) LDPE (420) EOEG (300250) ethoxylates detergent alcohols (300)
Lake Charles Louisiana H2 2019
8 new crackers from 2017-2019 = 94m tonnesyear
Expansions of existing US crackers plus 1 restart
Company Capacity (ktyear) Location StatusStart-Up
LyondellBasell 363 Corpus Christi Texas Fully started up Q2 2017
Westlake Chemical 32 Calvert City Kentucky Started up Apr 2017
Indorama (restart) 440 Lake Charles Louisiana May 2019
Dow 91 Orange Texas H1 2019
Dow 500 Freeport Texas 2020
INEOS 270 Chocolate Bayou Texas 2020
LyondellBasell 250 Channelview Texas Evaluating for 2020s
Expansions about 14m tonnesyear + new crackers 94m = 108m or over 35 of existing US capacity by 2019
North America PE expansions
Company Capacity (ktyear) Grade breakdown Location Start-Up
Dow Chemical 400 ELITE PE Freeport Texas Q3 2017
Dow Chemical 350 LDPE Plaquemine Lousiana Q4 2017
Chevron Phillips Chemical 1000 Bimodal HDPE (500) mLLDPE (500) Old Ocean Texas Q3 2017
ExxonMobil Chemical 1300 mLLDPE plus LLDPE (2 x 650) Mont Belvieu Texas Q4 2017
INEOSSasol 470 HDPE La Porte Texas Q4 2017
Dow Chemical 125 Bimodal HDPE St Charles Louisiana Q4 2018
Sasol 890 LLDPE (470) LDPE (420) Lake Charles Louisiana Q1 2019 Q3 2019
LyondellBasell 500 HDPE La Porte Texas Q3 2019
Formosa Plastics 800 HDPE (400) LDPE (400) Point Comfort Texas H2 2019
ExxonMobil Chemical 650 LLDPE Beaumont Texas 2019
TotalBorealisNOVA 625 Borstar PE Bayport Texas 2021
Shell 1600 HDPELLDPE (2x 550) HDPE (500) Monaca Pennsylvania Early 2020s
PTT Global Chemicals 700 HDPE (2x 350) Belmont County Ohio NA
NOVA Chemicals 430 LLDPE Sarnia Canada 2022
SABICExxonMobil NA PE unspec (2 units) Corpus Christi Texas H1 2022
Dow Chemical 600 PE (unspec) US Gulf Coast 2021-2023
Dow Chemical 350 PE (unspec) US global debottlenecks 2021-2023
Through 2019 = 65m tonnesyear (+39 US capacity)Through 2022 = 121m tonnesyear (+74 US capacity)
Assuming 1300kt PE for SABICExxonMobil
2nd wave of new US cracker projects
CompanyCapacity (ktyear)
Downstream (ktyear)
Location Start-up Status
TotalBorealisNOVA
1000Borstar PE (625) + existing PE (400)
Port Arthur Texas End 2020Under
construction
Shell 1500HDPELLDPE (2x 550)
HDPE (500)Monaca
PennsylvaniaEarly 2020s
Underconstruction
SABICExxonMobil
1800 PE (2 units) MEGCorpus Christi
TexasH1 2022
Underconstruction
PTTGCDaelim 1000HDPE (700) MEG (500) EO (100)
Belmont County Ohio
NA Evaluation
Formosa Petrochemicals
1200LLDPE (400) HDPE
(400) EG (900)St James Parish
Louisiana2022 Evaluation
Chevron Phillips Chemical
NA NA US Gulf Coast NAFID late 2019
early 2020
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
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Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
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Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
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Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
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Agenda
US shale oil boom and its impact on the ethylene market
US cracker and PE projects
Overview of US exports
Impact of shale oil on the propylene chain
US propylene PP projects
US PP importexport dynamics
Shale oil drives US ethylene advantage
Shale Oil
Shale oilmdashGame changer for US energy
bull Lower 48 crude oil production up around 155 over last ten years
bull US surpasses Saudi Arabia as largest oil producing country
bull US may transition from net importer to net exporter of energy
Associated gasesmdashthe petrochemical game changer
Imported Ethane costs are representative of purchasing Ethane FOB Mt BV USG and shipped to Destination includes Liquefaction amp Handling Costs
Abundant NGL supplies give the US the worldrsquos lowest cost ethylene production
The US ethylene advantage
Abundant US ethanemdashcan be flared on sold as a cracker feedstock
US ethane crackers produce ethylene at a considerable cash cost advantage relative to naphtha crackers
Ethylene is difficult to exportmdashUS producers are moving to capture the advantage by exporting derivatives
US cracker feedslates
Ethane is consistently the cheapest available feed
Many new crackers are ethane only older crackers have feedstock flexibility
Some new crackers lack infrastructure to store co-products and re-route them to the feed
Propane and butane are sometimes preferred when cracker operators seek to maximize co-product production
Expansions of USGC NGL fractionation
Company Capacity (bblday) Location StatusStart-Up
Phillips 66 150000 Brazoria County Texas Late 2020
Phillips 66 150000 Brazoria County Texas Late 2020
Enterprise 150000 Mont Belvieu Texas Q1 2020
ONEOK 125000 Mont Belvieu Texas Q1 2021
Targa 110000 Mont Belvieu Texas Q1 2020
Targa 110000 Mont Belvieu Texas Q2 2020
Energy Transfer (Lone Star) 150000 Mont Belvieu Texas Q1 2020
Expansions = 945000 bblday
New US crackers complete under construction through 2019
CompanyC2 capacity
(ktyear)Downstream (ktyear) Location Start-Up
OxyChemMexichem 544 Feed existing VCM plant of 1050 Ingleside Texas Q1 2017
Dow Chemical 1500ELITE PE (400) LDPE (350) ndash Plaquemine Louisiana EPDM (200) elastomers (320)
Freeport Texas Q3 2017
Chevron Phillips Chemical 1725Bimodal HDPE (500) mLLDPE (500) both at Old Ocean
Cedar Bayou Texas Q1 2018
ExxonMobil Chemical 1500mLLDPE plus LLDPE (650 x2) at Mont Belvieu
Baytown Texas Q3 2018
LotteWestlake 1000MEG (760) by Lotte feed into existing PVC for Westlake
St Charles Louisiana H1 2019
Shintech 500 VCM (400) PVC (290) caustic soda (270) Plaquemine Louisiana H1 2019
Formosa Plastics 1200 HDPE (400) LDPE (400) EG (800) Point Comfort Texas H2 2019
Sasol 1500LLDPE (470) LDPE (420) EOEG (300250) ethoxylates detergent alcohols (300)
Lake Charles Louisiana H2 2019
8 new crackers from 2017-2019 = 94m tonnesyear
Expansions of existing US crackers plus 1 restart
Company Capacity (ktyear) Location StatusStart-Up
LyondellBasell 363 Corpus Christi Texas Fully started up Q2 2017
Westlake Chemical 32 Calvert City Kentucky Started up Apr 2017
Indorama (restart) 440 Lake Charles Louisiana May 2019
Dow 91 Orange Texas H1 2019
Dow 500 Freeport Texas 2020
INEOS 270 Chocolate Bayou Texas 2020
LyondellBasell 250 Channelview Texas Evaluating for 2020s
Expansions about 14m tonnesyear + new crackers 94m = 108m or over 35 of existing US capacity by 2019
North America PE expansions
Company Capacity (ktyear) Grade breakdown Location Start-Up
Dow Chemical 400 ELITE PE Freeport Texas Q3 2017
Dow Chemical 350 LDPE Plaquemine Lousiana Q4 2017
Chevron Phillips Chemical 1000 Bimodal HDPE (500) mLLDPE (500) Old Ocean Texas Q3 2017
ExxonMobil Chemical 1300 mLLDPE plus LLDPE (2 x 650) Mont Belvieu Texas Q4 2017
INEOSSasol 470 HDPE La Porte Texas Q4 2017
Dow Chemical 125 Bimodal HDPE St Charles Louisiana Q4 2018
Sasol 890 LLDPE (470) LDPE (420) Lake Charles Louisiana Q1 2019 Q3 2019
LyondellBasell 500 HDPE La Porte Texas Q3 2019
Formosa Plastics 800 HDPE (400) LDPE (400) Point Comfort Texas H2 2019
ExxonMobil Chemical 650 LLDPE Beaumont Texas 2019
TotalBorealisNOVA 625 Borstar PE Bayport Texas 2021
Shell 1600 HDPELLDPE (2x 550) HDPE (500) Monaca Pennsylvania Early 2020s
PTT Global Chemicals 700 HDPE (2x 350) Belmont County Ohio NA
NOVA Chemicals 430 LLDPE Sarnia Canada 2022
SABICExxonMobil NA PE unspec (2 units) Corpus Christi Texas H1 2022
Dow Chemical 600 PE (unspec) US Gulf Coast 2021-2023
Dow Chemical 350 PE (unspec) US global debottlenecks 2021-2023
Through 2019 = 65m tonnesyear (+39 US capacity)Through 2022 = 121m tonnesyear (+74 US capacity)
Assuming 1300kt PE for SABICExxonMobil
2nd wave of new US cracker projects
CompanyCapacity (ktyear)
Downstream (ktyear)
Location Start-up Status
TotalBorealisNOVA
1000Borstar PE (625) + existing PE (400)
Port Arthur Texas End 2020Under
construction
Shell 1500HDPELLDPE (2x 550)
HDPE (500)Monaca
PennsylvaniaEarly 2020s
Underconstruction
SABICExxonMobil
1800 PE (2 units) MEGCorpus Christi
TexasH1 2022
Underconstruction
PTTGCDaelim 1000HDPE (700) MEG (500) EO (100)
Belmont County Ohio
NA Evaluation
Formosa Petrochemicals
1200LLDPE (400) HDPE
(400) EG (900)St James Parish
Louisiana2022 Evaluation
Chevron Phillips Chemical
NA NA US Gulf Coast NAFID late 2019
early 2020
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Shale oil drives US ethylene advantage
Shale Oil
Shale oilmdashGame changer for US energy
bull Lower 48 crude oil production up around 155 over last ten years
bull US surpasses Saudi Arabia as largest oil producing country
bull US may transition from net importer to net exporter of energy
Associated gasesmdashthe petrochemical game changer
Imported Ethane costs are representative of purchasing Ethane FOB Mt BV USG and shipped to Destination includes Liquefaction amp Handling Costs
Abundant NGL supplies give the US the worldrsquos lowest cost ethylene production
The US ethylene advantage
Abundant US ethanemdashcan be flared on sold as a cracker feedstock
US ethane crackers produce ethylene at a considerable cash cost advantage relative to naphtha crackers
Ethylene is difficult to exportmdashUS producers are moving to capture the advantage by exporting derivatives
US cracker feedslates
Ethane is consistently the cheapest available feed
Many new crackers are ethane only older crackers have feedstock flexibility
Some new crackers lack infrastructure to store co-products and re-route them to the feed
Propane and butane are sometimes preferred when cracker operators seek to maximize co-product production
Expansions of USGC NGL fractionation
Company Capacity (bblday) Location StatusStart-Up
Phillips 66 150000 Brazoria County Texas Late 2020
Phillips 66 150000 Brazoria County Texas Late 2020
Enterprise 150000 Mont Belvieu Texas Q1 2020
ONEOK 125000 Mont Belvieu Texas Q1 2021
Targa 110000 Mont Belvieu Texas Q1 2020
Targa 110000 Mont Belvieu Texas Q2 2020
Energy Transfer (Lone Star) 150000 Mont Belvieu Texas Q1 2020
Expansions = 945000 bblday
New US crackers complete under construction through 2019
CompanyC2 capacity
(ktyear)Downstream (ktyear) Location Start-Up
OxyChemMexichem 544 Feed existing VCM plant of 1050 Ingleside Texas Q1 2017
Dow Chemical 1500ELITE PE (400) LDPE (350) ndash Plaquemine Louisiana EPDM (200) elastomers (320)
Freeport Texas Q3 2017
Chevron Phillips Chemical 1725Bimodal HDPE (500) mLLDPE (500) both at Old Ocean
Cedar Bayou Texas Q1 2018
ExxonMobil Chemical 1500mLLDPE plus LLDPE (650 x2) at Mont Belvieu
Baytown Texas Q3 2018
LotteWestlake 1000MEG (760) by Lotte feed into existing PVC for Westlake
St Charles Louisiana H1 2019
Shintech 500 VCM (400) PVC (290) caustic soda (270) Plaquemine Louisiana H1 2019
Formosa Plastics 1200 HDPE (400) LDPE (400) EG (800) Point Comfort Texas H2 2019
Sasol 1500LLDPE (470) LDPE (420) EOEG (300250) ethoxylates detergent alcohols (300)
Lake Charles Louisiana H2 2019
8 new crackers from 2017-2019 = 94m tonnesyear
Expansions of existing US crackers plus 1 restart
Company Capacity (ktyear) Location StatusStart-Up
LyondellBasell 363 Corpus Christi Texas Fully started up Q2 2017
Westlake Chemical 32 Calvert City Kentucky Started up Apr 2017
Indorama (restart) 440 Lake Charles Louisiana May 2019
Dow 91 Orange Texas H1 2019
Dow 500 Freeport Texas 2020
INEOS 270 Chocolate Bayou Texas 2020
LyondellBasell 250 Channelview Texas Evaluating for 2020s
Expansions about 14m tonnesyear + new crackers 94m = 108m or over 35 of existing US capacity by 2019
North America PE expansions
Company Capacity (ktyear) Grade breakdown Location Start-Up
Dow Chemical 400 ELITE PE Freeport Texas Q3 2017
Dow Chemical 350 LDPE Plaquemine Lousiana Q4 2017
Chevron Phillips Chemical 1000 Bimodal HDPE (500) mLLDPE (500) Old Ocean Texas Q3 2017
ExxonMobil Chemical 1300 mLLDPE plus LLDPE (2 x 650) Mont Belvieu Texas Q4 2017
INEOSSasol 470 HDPE La Porte Texas Q4 2017
Dow Chemical 125 Bimodal HDPE St Charles Louisiana Q4 2018
Sasol 890 LLDPE (470) LDPE (420) Lake Charles Louisiana Q1 2019 Q3 2019
LyondellBasell 500 HDPE La Porte Texas Q3 2019
Formosa Plastics 800 HDPE (400) LDPE (400) Point Comfort Texas H2 2019
ExxonMobil Chemical 650 LLDPE Beaumont Texas 2019
TotalBorealisNOVA 625 Borstar PE Bayport Texas 2021
Shell 1600 HDPELLDPE (2x 550) HDPE (500) Monaca Pennsylvania Early 2020s
PTT Global Chemicals 700 HDPE (2x 350) Belmont County Ohio NA
NOVA Chemicals 430 LLDPE Sarnia Canada 2022
SABICExxonMobil NA PE unspec (2 units) Corpus Christi Texas H1 2022
Dow Chemical 600 PE (unspec) US Gulf Coast 2021-2023
Dow Chemical 350 PE (unspec) US global debottlenecks 2021-2023
Through 2019 = 65m tonnesyear (+39 US capacity)Through 2022 = 121m tonnesyear (+74 US capacity)
Assuming 1300kt PE for SABICExxonMobil
2nd wave of new US cracker projects
CompanyCapacity (ktyear)
Downstream (ktyear)
Location Start-up Status
TotalBorealisNOVA
1000Borstar PE (625) + existing PE (400)
Port Arthur Texas End 2020Under
construction
Shell 1500HDPELLDPE (2x 550)
HDPE (500)Monaca
PennsylvaniaEarly 2020s
Underconstruction
SABICExxonMobil
1800 PE (2 units) MEGCorpus Christi
TexasH1 2022
Underconstruction
PTTGCDaelim 1000HDPE (700) MEG (500) EO (100)
Belmont County Ohio
NA Evaluation
Formosa Petrochemicals
1200LLDPE (400) HDPE
(400) EG (900)St James Parish
Louisiana2022 Evaluation
Chevron Phillips Chemical
NA NA US Gulf Coast NAFID late 2019
early 2020
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
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Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
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Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
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Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Shale Oil
Shale oilmdashGame changer for US energy
bull Lower 48 crude oil production up around 155 over last ten years
bull US surpasses Saudi Arabia as largest oil producing country
bull US may transition from net importer to net exporter of energy
Associated gasesmdashthe petrochemical game changer
Imported Ethane costs are representative of purchasing Ethane FOB Mt BV USG and shipped to Destination includes Liquefaction amp Handling Costs
Abundant NGL supplies give the US the worldrsquos lowest cost ethylene production
The US ethylene advantage
Abundant US ethanemdashcan be flared on sold as a cracker feedstock
US ethane crackers produce ethylene at a considerable cash cost advantage relative to naphtha crackers
Ethylene is difficult to exportmdashUS producers are moving to capture the advantage by exporting derivatives
US cracker feedslates
Ethane is consistently the cheapest available feed
Many new crackers are ethane only older crackers have feedstock flexibility
Some new crackers lack infrastructure to store co-products and re-route them to the feed
Propane and butane are sometimes preferred when cracker operators seek to maximize co-product production
Expansions of USGC NGL fractionation
Company Capacity (bblday) Location StatusStart-Up
Phillips 66 150000 Brazoria County Texas Late 2020
Phillips 66 150000 Brazoria County Texas Late 2020
Enterprise 150000 Mont Belvieu Texas Q1 2020
ONEOK 125000 Mont Belvieu Texas Q1 2021
Targa 110000 Mont Belvieu Texas Q1 2020
Targa 110000 Mont Belvieu Texas Q2 2020
Energy Transfer (Lone Star) 150000 Mont Belvieu Texas Q1 2020
Expansions = 945000 bblday
New US crackers complete under construction through 2019
CompanyC2 capacity
(ktyear)Downstream (ktyear) Location Start-Up
OxyChemMexichem 544 Feed existing VCM plant of 1050 Ingleside Texas Q1 2017
Dow Chemical 1500ELITE PE (400) LDPE (350) ndash Plaquemine Louisiana EPDM (200) elastomers (320)
Freeport Texas Q3 2017
Chevron Phillips Chemical 1725Bimodal HDPE (500) mLLDPE (500) both at Old Ocean
Cedar Bayou Texas Q1 2018
ExxonMobil Chemical 1500mLLDPE plus LLDPE (650 x2) at Mont Belvieu
Baytown Texas Q3 2018
LotteWestlake 1000MEG (760) by Lotte feed into existing PVC for Westlake
St Charles Louisiana H1 2019
Shintech 500 VCM (400) PVC (290) caustic soda (270) Plaquemine Louisiana H1 2019
Formosa Plastics 1200 HDPE (400) LDPE (400) EG (800) Point Comfort Texas H2 2019
Sasol 1500LLDPE (470) LDPE (420) EOEG (300250) ethoxylates detergent alcohols (300)
Lake Charles Louisiana H2 2019
8 new crackers from 2017-2019 = 94m tonnesyear
Expansions of existing US crackers plus 1 restart
Company Capacity (ktyear) Location StatusStart-Up
LyondellBasell 363 Corpus Christi Texas Fully started up Q2 2017
Westlake Chemical 32 Calvert City Kentucky Started up Apr 2017
Indorama (restart) 440 Lake Charles Louisiana May 2019
Dow 91 Orange Texas H1 2019
Dow 500 Freeport Texas 2020
INEOS 270 Chocolate Bayou Texas 2020
LyondellBasell 250 Channelview Texas Evaluating for 2020s
Expansions about 14m tonnesyear + new crackers 94m = 108m or over 35 of existing US capacity by 2019
North America PE expansions
Company Capacity (ktyear) Grade breakdown Location Start-Up
Dow Chemical 400 ELITE PE Freeport Texas Q3 2017
Dow Chemical 350 LDPE Plaquemine Lousiana Q4 2017
Chevron Phillips Chemical 1000 Bimodal HDPE (500) mLLDPE (500) Old Ocean Texas Q3 2017
ExxonMobil Chemical 1300 mLLDPE plus LLDPE (2 x 650) Mont Belvieu Texas Q4 2017
INEOSSasol 470 HDPE La Porte Texas Q4 2017
Dow Chemical 125 Bimodal HDPE St Charles Louisiana Q4 2018
Sasol 890 LLDPE (470) LDPE (420) Lake Charles Louisiana Q1 2019 Q3 2019
LyondellBasell 500 HDPE La Porte Texas Q3 2019
Formosa Plastics 800 HDPE (400) LDPE (400) Point Comfort Texas H2 2019
ExxonMobil Chemical 650 LLDPE Beaumont Texas 2019
TotalBorealisNOVA 625 Borstar PE Bayport Texas 2021
Shell 1600 HDPELLDPE (2x 550) HDPE (500) Monaca Pennsylvania Early 2020s
PTT Global Chemicals 700 HDPE (2x 350) Belmont County Ohio NA
NOVA Chemicals 430 LLDPE Sarnia Canada 2022
SABICExxonMobil NA PE unspec (2 units) Corpus Christi Texas H1 2022
Dow Chemical 600 PE (unspec) US Gulf Coast 2021-2023
Dow Chemical 350 PE (unspec) US global debottlenecks 2021-2023
Through 2019 = 65m tonnesyear (+39 US capacity)Through 2022 = 121m tonnesyear (+74 US capacity)
Assuming 1300kt PE for SABICExxonMobil
2nd wave of new US cracker projects
CompanyCapacity (ktyear)
Downstream (ktyear)
Location Start-up Status
TotalBorealisNOVA
1000Borstar PE (625) + existing PE (400)
Port Arthur Texas End 2020Under
construction
Shell 1500HDPELLDPE (2x 550)
HDPE (500)Monaca
PennsylvaniaEarly 2020s
Underconstruction
SABICExxonMobil
1800 PE (2 units) MEGCorpus Christi
TexasH1 2022
Underconstruction
PTTGCDaelim 1000HDPE (700) MEG (500) EO (100)
Belmont County Ohio
NA Evaluation
Formosa Petrochemicals
1200LLDPE (400) HDPE
(400) EG (900)St James Parish
Louisiana2022 Evaluation
Chevron Phillips Chemical
NA NA US Gulf Coast NAFID late 2019
early 2020
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Shale oilmdashGame changer for US energy
bull Lower 48 crude oil production up around 155 over last ten years
bull US surpasses Saudi Arabia as largest oil producing country
bull US may transition from net importer to net exporter of energy
Associated gasesmdashthe petrochemical game changer
Imported Ethane costs are representative of purchasing Ethane FOB Mt BV USG and shipped to Destination includes Liquefaction amp Handling Costs
Abundant NGL supplies give the US the worldrsquos lowest cost ethylene production
The US ethylene advantage
Abundant US ethanemdashcan be flared on sold as a cracker feedstock
US ethane crackers produce ethylene at a considerable cash cost advantage relative to naphtha crackers
Ethylene is difficult to exportmdashUS producers are moving to capture the advantage by exporting derivatives
US cracker feedslates
Ethane is consistently the cheapest available feed
Many new crackers are ethane only older crackers have feedstock flexibility
Some new crackers lack infrastructure to store co-products and re-route them to the feed
Propane and butane are sometimes preferred when cracker operators seek to maximize co-product production
Expansions of USGC NGL fractionation
Company Capacity (bblday) Location StatusStart-Up
Phillips 66 150000 Brazoria County Texas Late 2020
Phillips 66 150000 Brazoria County Texas Late 2020
Enterprise 150000 Mont Belvieu Texas Q1 2020
ONEOK 125000 Mont Belvieu Texas Q1 2021
Targa 110000 Mont Belvieu Texas Q1 2020
Targa 110000 Mont Belvieu Texas Q2 2020
Energy Transfer (Lone Star) 150000 Mont Belvieu Texas Q1 2020
Expansions = 945000 bblday
New US crackers complete under construction through 2019
CompanyC2 capacity
(ktyear)Downstream (ktyear) Location Start-Up
OxyChemMexichem 544 Feed existing VCM plant of 1050 Ingleside Texas Q1 2017
Dow Chemical 1500ELITE PE (400) LDPE (350) ndash Plaquemine Louisiana EPDM (200) elastomers (320)
Freeport Texas Q3 2017
Chevron Phillips Chemical 1725Bimodal HDPE (500) mLLDPE (500) both at Old Ocean
Cedar Bayou Texas Q1 2018
ExxonMobil Chemical 1500mLLDPE plus LLDPE (650 x2) at Mont Belvieu
Baytown Texas Q3 2018
LotteWestlake 1000MEG (760) by Lotte feed into existing PVC for Westlake
St Charles Louisiana H1 2019
Shintech 500 VCM (400) PVC (290) caustic soda (270) Plaquemine Louisiana H1 2019
Formosa Plastics 1200 HDPE (400) LDPE (400) EG (800) Point Comfort Texas H2 2019
Sasol 1500LLDPE (470) LDPE (420) EOEG (300250) ethoxylates detergent alcohols (300)
Lake Charles Louisiana H2 2019
8 new crackers from 2017-2019 = 94m tonnesyear
Expansions of existing US crackers plus 1 restart
Company Capacity (ktyear) Location StatusStart-Up
LyondellBasell 363 Corpus Christi Texas Fully started up Q2 2017
Westlake Chemical 32 Calvert City Kentucky Started up Apr 2017
Indorama (restart) 440 Lake Charles Louisiana May 2019
Dow 91 Orange Texas H1 2019
Dow 500 Freeport Texas 2020
INEOS 270 Chocolate Bayou Texas 2020
LyondellBasell 250 Channelview Texas Evaluating for 2020s
Expansions about 14m tonnesyear + new crackers 94m = 108m or over 35 of existing US capacity by 2019
North America PE expansions
Company Capacity (ktyear) Grade breakdown Location Start-Up
Dow Chemical 400 ELITE PE Freeport Texas Q3 2017
Dow Chemical 350 LDPE Plaquemine Lousiana Q4 2017
Chevron Phillips Chemical 1000 Bimodal HDPE (500) mLLDPE (500) Old Ocean Texas Q3 2017
ExxonMobil Chemical 1300 mLLDPE plus LLDPE (2 x 650) Mont Belvieu Texas Q4 2017
INEOSSasol 470 HDPE La Porte Texas Q4 2017
Dow Chemical 125 Bimodal HDPE St Charles Louisiana Q4 2018
Sasol 890 LLDPE (470) LDPE (420) Lake Charles Louisiana Q1 2019 Q3 2019
LyondellBasell 500 HDPE La Porte Texas Q3 2019
Formosa Plastics 800 HDPE (400) LDPE (400) Point Comfort Texas H2 2019
ExxonMobil Chemical 650 LLDPE Beaumont Texas 2019
TotalBorealisNOVA 625 Borstar PE Bayport Texas 2021
Shell 1600 HDPELLDPE (2x 550) HDPE (500) Monaca Pennsylvania Early 2020s
PTT Global Chemicals 700 HDPE (2x 350) Belmont County Ohio NA
NOVA Chemicals 430 LLDPE Sarnia Canada 2022
SABICExxonMobil NA PE unspec (2 units) Corpus Christi Texas H1 2022
Dow Chemical 600 PE (unspec) US Gulf Coast 2021-2023
Dow Chemical 350 PE (unspec) US global debottlenecks 2021-2023
Through 2019 = 65m tonnesyear (+39 US capacity)Through 2022 = 121m tonnesyear (+74 US capacity)
Assuming 1300kt PE for SABICExxonMobil
2nd wave of new US cracker projects
CompanyCapacity (ktyear)
Downstream (ktyear)
Location Start-up Status
TotalBorealisNOVA
1000Borstar PE (625) + existing PE (400)
Port Arthur Texas End 2020Under
construction
Shell 1500HDPELLDPE (2x 550)
HDPE (500)Monaca
PennsylvaniaEarly 2020s
Underconstruction
SABICExxonMobil
1800 PE (2 units) MEGCorpus Christi
TexasH1 2022
Underconstruction
PTTGCDaelim 1000HDPE (700) MEG (500) EO (100)
Belmont County Ohio
NA Evaluation
Formosa Petrochemicals
1200LLDPE (400) HDPE
(400) EG (900)St James Parish
Louisiana2022 Evaluation
Chevron Phillips Chemical
NA NA US Gulf Coast NAFID late 2019
early 2020
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Associated gasesmdashthe petrochemical game changer
Imported Ethane costs are representative of purchasing Ethane FOB Mt BV USG and shipped to Destination includes Liquefaction amp Handling Costs
Abundant NGL supplies give the US the worldrsquos lowest cost ethylene production
The US ethylene advantage
Abundant US ethanemdashcan be flared on sold as a cracker feedstock
US ethane crackers produce ethylene at a considerable cash cost advantage relative to naphtha crackers
Ethylene is difficult to exportmdashUS producers are moving to capture the advantage by exporting derivatives
US cracker feedslates
Ethane is consistently the cheapest available feed
Many new crackers are ethane only older crackers have feedstock flexibility
Some new crackers lack infrastructure to store co-products and re-route them to the feed
Propane and butane are sometimes preferred when cracker operators seek to maximize co-product production
Expansions of USGC NGL fractionation
Company Capacity (bblday) Location StatusStart-Up
Phillips 66 150000 Brazoria County Texas Late 2020
Phillips 66 150000 Brazoria County Texas Late 2020
Enterprise 150000 Mont Belvieu Texas Q1 2020
ONEOK 125000 Mont Belvieu Texas Q1 2021
Targa 110000 Mont Belvieu Texas Q1 2020
Targa 110000 Mont Belvieu Texas Q2 2020
Energy Transfer (Lone Star) 150000 Mont Belvieu Texas Q1 2020
Expansions = 945000 bblday
New US crackers complete under construction through 2019
CompanyC2 capacity
(ktyear)Downstream (ktyear) Location Start-Up
OxyChemMexichem 544 Feed existing VCM plant of 1050 Ingleside Texas Q1 2017
Dow Chemical 1500ELITE PE (400) LDPE (350) ndash Plaquemine Louisiana EPDM (200) elastomers (320)
Freeport Texas Q3 2017
Chevron Phillips Chemical 1725Bimodal HDPE (500) mLLDPE (500) both at Old Ocean
Cedar Bayou Texas Q1 2018
ExxonMobil Chemical 1500mLLDPE plus LLDPE (650 x2) at Mont Belvieu
Baytown Texas Q3 2018
LotteWestlake 1000MEG (760) by Lotte feed into existing PVC for Westlake
St Charles Louisiana H1 2019
Shintech 500 VCM (400) PVC (290) caustic soda (270) Plaquemine Louisiana H1 2019
Formosa Plastics 1200 HDPE (400) LDPE (400) EG (800) Point Comfort Texas H2 2019
Sasol 1500LLDPE (470) LDPE (420) EOEG (300250) ethoxylates detergent alcohols (300)
Lake Charles Louisiana H2 2019
8 new crackers from 2017-2019 = 94m tonnesyear
Expansions of existing US crackers plus 1 restart
Company Capacity (ktyear) Location StatusStart-Up
LyondellBasell 363 Corpus Christi Texas Fully started up Q2 2017
Westlake Chemical 32 Calvert City Kentucky Started up Apr 2017
Indorama (restart) 440 Lake Charles Louisiana May 2019
Dow 91 Orange Texas H1 2019
Dow 500 Freeport Texas 2020
INEOS 270 Chocolate Bayou Texas 2020
LyondellBasell 250 Channelview Texas Evaluating for 2020s
Expansions about 14m tonnesyear + new crackers 94m = 108m or over 35 of existing US capacity by 2019
North America PE expansions
Company Capacity (ktyear) Grade breakdown Location Start-Up
Dow Chemical 400 ELITE PE Freeport Texas Q3 2017
Dow Chemical 350 LDPE Plaquemine Lousiana Q4 2017
Chevron Phillips Chemical 1000 Bimodal HDPE (500) mLLDPE (500) Old Ocean Texas Q3 2017
ExxonMobil Chemical 1300 mLLDPE plus LLDPE (2 x 650) Mont Belvieu Texas Q4 2017
INEOSSasol 470 HDPE La Porte Texas Q4 2017
Dow Chemical 125 Bimodal HDPE St Charles Louisiana Q4 2018
Sasol 890 LLDPE (470) LDPE (420) Lake Charles Louisiana Q1 2019 Q3 2019
LyondellBasell 500 HDPE La Porte Texas Q3 2019
Formosa Plastics 800 HDPE (400) LDPE (400) Point Comfort Texas H2 2019
ExxonMobil Chemical 650 LLDPE Beaumont Texas 2019
TotalBorealisNOVA 625 Borstar PE Bayport Texas 2021
Shell 1600 HDPELLDPE (2x 550) HDPE (500) Monaca Pennsylvania Early 2020s
PTT Global Chemicals 700 HDPE (2x 350) Belmont County Ohio NA
NOVA Chemicals 430 LLDPE Sarnia Canada 2022
SABICExxonMobil NA PE unspec (2 units) Corpus Christi Texas H1 2022
Dow Chemical 600 PE (unspec) US Gulf Coast 2021-2023
Dow Chemical 350 PE (unspec) US global debottlenecks 2021-2023
Through 2019 = 65m tonnesyear (+39 US capacity)Through 2022 = 121m tonnesyear (+74 US capacity)
Assuming 1300kt PE for SABICExxonMobil
2nd wave of new US cracker projects
CompanyCapacity (ktyear)
Downstream (ktyear)
Location Start-up Status
TotalBorealisNOVA
1000Borstar PE (625) + existing PE (400)
Port Arthur Texas End 2020Under
construction
Shell 1500HDPELLDPE (2x 550)
HDPE (500)Monaca
PennsylvaniaEarly 2020s
Underconstruction
SABICExxonMobil
1800 PE (2 units) MEGCorpus Christi
TexasH1 2022
Underconstruction
PTTGCDaelim 1000HDPE (700) MEG (500) EO (100)
Belmont County Ohio
NA Evaluation
Formosa Petrochemicals
1200LLDPE (400) HDPE
(400) EG (900)St James Parish
Louisiana2022 Evaluation
Chevron Phillips Chemical
NA NA US Gulf Coast NAFID late 2019
early 2020
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Imported Ethane costs are representative of purchasing Ethane FOB Mt BV USG and shipped to Destination includes Liquefaction amp Handling Costs
Abundant NGL supplies give the US the worldrsquos lowest cost ethylene production
The US ethylene advantage
Abundant US ethanemdashcan be flared on sold as a cracker feedstock
US ethane crackers produce ethylene at a considerable cash cost advantage relative to naphtha crackers
Ethylene is difficult to exportmdashUS producers are moving to capture the advantage by exporting derivatives
US cracker feedslates
Ethane is consistently the cheapest available feed
Many new crackers are ethane only older crackers have feedstock flexibility
Some new crackers lack infrastructure to store co-products and re-route them to the feed
Propane and butane are sometimes preferred when cracker operators seek to maximize co-product production
Expansions of USGC NGL fractionation
Company Capacity (bblday) Location StatusStart-Up
Phillips 66 150000 Brazoria County Texas Late 2020
Phillips 66 150000 Brazoria County Texas Late 2020
Enterprise 150000 Mont Belvieu Texas Q1 2020
ONEOK 125000 Mont Belvieu Texas Q1 2021
Targa 110000 Mont Belvieu Texas Q1 2020
Targa 110000 Mont Belvieu Texas Q2 2020
Energy Transfer (Lone Star) 150000 Mont Belvieu Texas Q1 2020
Expansions = 945000 bblday
New US crackers complete under construction through 2019
CompanyC2 capacity
(ktyear)Downstream (ktyear) Location Start-Up
OxyChemMexichem 544 Feed existing VCM plant of 1050 Ingleside Texas Q1 2017
Dow Chemical 1500ELITE PE (400) LDPE (350) ndash Plaquemine Louisiana EPDM (200) elastomers (320)
Freeport Texas Q3 2017
Chevron Phillips Chemical 1725Bimodal HDPE (500) mLLDPE (500) both at Old Ocean
Cedar Bayou Texas Q1 2018
ExxonMobil Chemical 1500mLLDPE plus LLDPE (650 x2) at Mont Belvieu
Baytown Texas Q3 2018
LotteWestlake 1000MEG (760) by Lotte feed into existing PVC for Westlake
St Charles Louisiana H1 2019
Shintech 500 VCM (400) PVC (290) caustic soda (270) Plaquemine Louisiana H1 2019
Formosa Plastics 1200 HDPE (400) LDPE (400) EG (800) Point Comfort Texas H2 2019
Sasol 1500LLDPE (470) LDPE (420) EOEG (300250) ethoxylates detergent alcohols (300)
Lake Charles Louisiana H2 2019
8 new crackers from 2017-2019 = 94m tonnesyear
Expansions of existing US crackers plus 1 restart
Company Capacity (ktyear) Location StatusStart-Up
LyondellBasell 363 Corpus Christi Texas Fully started up Q2 2017
Westlake Chemical 32 Calvert City Kentucky Started up Apr 2017
Indorama (restart) 440 Lake Charles Louisiana May 2019
Dow 91 Orange Texas H1 2019
Dow 500 Freeport Texas 2020
INEOS 270 Chocolate Bayou Texas 2020
LyondellBasell 250 Channelview Texas Evaluating for 2020s
Expansions about 14m tonnesyear + new crackers 94m = 108m or over 35 of existing US capacity by 2019
North America PE expansions
Company Capacity (ktyear) Grade breakdown Location Start-Up
Dow Chemical 400 ELITE PE Freeport Texas Q3 2017
Dow Chemical 350 LDPE Plaquemine Lousiana Q4 2017
Chevron Phillips Chemical 1000 Bimodal HDPE (500) mLLDPE (500) Old Ocean Texas Q3 2017
ExxonMobil Chemical 1300 mLLDPE plus LLDPE (2 x 650) Mont Belvieu Texas Q4 2017
INEOSSasol 470 HDPE La Porte Texas Q4 2017
Dow Chemical 125 Bimodal HDPE St Charles Louisiana Q4 2018
Sasol 890 LLDPE (470) LDPE (420) Lake Charles Louisiana Q1 2019 Q3 2019
LyondellBasell 500 HDPE La Porte Texas Q3 2019
Formosa Plastics 800 HDPE (400) LDPE (400) Point Comfort Texas H2 2019
ExxonMobil Chemical 650 LLDPE Beaumont Texas 2019
TotalBorealisNOVA 625 Borstar PE Bayport Texas 2021
Shell 1600 HDPELLDPE (2x 550) HDPE (500) Monaca Pennsylvania Early 2020s
PTT Global Chemicals 700 HDPE (2x 350) Belmont County Ohio NA
NOVA Chemicals 430 LLDPE Sarnia Canada 2022
SABICExxonMobil NA PE unspec (2 units) Corpus Christi Texas H1 2022
Dow Chemical 600 PE (unspec) US Gulf Coast 2021-2023
Dow Chemical 350 PE (unspec) US global debottlenecks 2021-2023
Through 2019 = 65m tonnesyear (+39 US capacity)Through 2022 = 121m tonnesyear (+74 US capacity)
Assuming 1300kt PE for SABICExxonMobil
2nd wave of new US cracker projects
CompanyCapacity (ktyear)
Downstream (ktyear)
Location Start-up Status
TotalBorealisNOVA
1000Borstar PE (625) + existing PE (400)
Port Arthur Texas End 2020Under
construction
Shell 1500HDPELLDPE (2x 550)
HDPE (500)Monaca
PennsylvaniaEarly 2020s
Underconstruction
SABICExxonMobil
1800 PE (2 units) MEGCorpus Christi
TexasH1 2022
Underconstruction
PTTGCDaelim 1000HDPE (700) MEG (500) EO (100)
Belmont County Ohio
NA Evaluation
Formosa Petrochemicals
1200LLDPE (400) HDPE
(400) EG (900)St James Parish
Louisiana2022 Evaluation
Chevron Phillips Chemical
NA NA US Gulf Coast NAFID late 2019
early 2020
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
The US ethylene advantage
Abundant US ethanemdashcan be flared on sold as a cracker feedstock
US ethane crackers produce ethylene at a considerable cash cost advantage relative to naphtha crackers
Ethylene is difficult to exportmdashUS producers are moving to capture the advantage by exporting derivatives
US cracker feedslates
Ethane is consistently the cheapest available feed
Many new crackers are ethane only older crackers have feedstock flexibility
Some new crackers lack infrastructure to store co-products and re-route them to the feed
Propane and butane are sometimes preferred when cracker operators seek to maximize co-product production
Expansions of USGC NGL fractionation
Company Capacity (bblday) Location StatusStart-Up
Phillips 66 150000 Brazoria County Texas Late 2020
Phillips 66 150000 Brazoria County Texas Late 2020
Enterprise 150000 Mont Belvieu Texas Q1 2020
ONEOK 125000 Mont Belvieu Texas Q1 2021
Targa 110000 Mont Belvieu Texas Q1 2020
Targa 110000 Mont Belvieu Texas Q2 2020
Energy Transfer (Lone Star) 150000 Mont Belvieu Texas Q1 2020
Expansions = 945000 bblday
New US crackers complete under construction through 2019
CompanyC2 capacity
(ktyear)Downstream (ktyear) Location Start-Up
OxyChemMexichem 544 Feed existing VCM plant of 1050 Ingleside Texas Q1 2017
Dow Chemical 1500ELITE PE (400) LDPE (350) ndash Plaquemine Louisiana EPDM (200) elastomers (320)
Freeport Texas Q3 2017
Chevron Phillips Chemical 1725Bimodal HDPE (500) mLLDPE (500) both at Old Ocean
Cedar Bayou Texas Q1 2018
ExxonMobil Chemical 1500mLLDPE plus LLDPE (650 x2) at Mont Belvieu
Baytown Texas Q3 2018
LotteWestlake 1000MEG (760) by Lotte feed into existing PVC for Westlake
St Charles Louisiana H1 2019
Shintech 500 VCM (400) PVC (290) caustic soda (270) Plaquemine Louisiana H1 2019
Formosa Plastics 1200 HDPE (400) LDPE (400) EG (800) Point Comfort Texas H2 2019
Sasol 1500LLDPE (470) LDPE (420) EOEG (300250) ethoxylates detergent alcohols (300)
Lake Charles Louisiana H2 2019
8 new crackers from 2017-2019 = 94m tonnesyear
Expansions of existing US crackers plus 1 restart
Company Capacity (ktyear) Location StatusStart-Up
LyondellBasell 363 Corpus Christi Texas Fully started up Q2 2017
Westlake Chemical 32 Calvert City Kentucky Started up Apr 2017
Indorama (restart) 440 Lake Charles Louisiana May 2019
Dow 91 Orange Texas H1 2019
Dow 500 Freeport Texas 2020
INEOS 270 Chocolate Bayou Texas 2020
LyondellBasell 250 Channelview Texas Evaluating for 2020s
Expansions about 14m tonnesyear + new crackers 94m = 108m or over 35 of existing US capacity by 2019
North America PE expansions
Company Capacity (ktyear) Grade breakdown Location Start-Up
Dow Chemical 400 ELITE PE Freeport Texas Q3 2017
Dow Chemical 350 LDPE Plaquemine Lousiana Q4 2017
Chevron Phillips Chemical 1000 Bimodal HDPE (500) mLLDPE (500) Old Ocean Texas Q3 2017
ExxonMobil Chemical 1300 mLLDPE plus LLDPE (2 x 650) Mont Belvieu Texas Q4 2017
INEOSSasol 470 HDPE La Porte Texas Q4 2017
Dow Chemical 125 Bimodal HDPE St Charles Louisiana Q4 2018
Sasol 890 LLDPE (470) LDPE (420) Lake Charles Louisiana Q1 2019 Q3 2019
LyondellBasell 500 HDPE La Porte Texas Q3 2019
Formosa Plastics 800 HDPE (400) LDPE (400) Point Comfort Texas H2 2019
ExxonMobil Chemical 650 LLDPE Beaumont Texas 2019
TotalBorealisNOVA 625 Borstar PE Bayport Texas 2021
Shell 1600 HDPELLDPE (2x 550) HDPE (500) Monaca Pennsylvania Early 2020s
PTT Global Chemicals 700 HDPE (2x 350) Belmont County Ohio NA
NOVA Chemicals 430 LLDPE Sarnia Canada 2022
SABICExxonMobil NA PE unspec (2 units) Corpus Christi Texas H1 2022
Dow Chemical 600 PE (unspec) US Gulf Coast 2021-2023
Dow Chemical 350 PE (unspec) US global debottlenecks 2021-2023
Through 2019 = 65m tonnesyear (+39 US capacity)Through 2022 = 121m tonnesyear (+74 US capacity)
Assuming 1300kt PE for SABICExxonMobil
2nd wave of new US cracker projects
CompanyCapacity (ktyear)
Downstream (ktyear)
Location Start-up Status
TotalBorealisNOVA
1000Borstar PE (625) + existing PE (400)
Port Arthur Texas End 2020Under
construction
Shell 1500HDPELLDPE (2x 550)
HDPE (500)Monaca
PennsylvaniaEarly 2020s
Underconstruction
SABICExxonMobil
1800 PE (2 units) MEGCorpus Christi
TexasH1 2022
Underconstruction
PTTGCDaelim 1000HDPE (700) MEG (500) EO (100)
Belmont County Ohio
NA Evaluation
Formosa Petrochemicals
1200LLDPE (400) HDPE
(400) EG (900)St James Parish
Louisiana2022 Evaluation
Chevron Phillips Chemical
NA NA US Gulf Coast NAFID late 2019
early 2020
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
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Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
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Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
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Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
US cracker feedslates
Ethane is consistently the cheapest available feed
Many new crackers are ethane only older crackers have feedstock flexibility
Some new crackers lack infrastructure to store co-products and re-route them to the feed
Propane and butane are sometimes preferred when cracker operators seek to maximize co-product production
Expansions of USGC NGL fractionation
Company Capacity (bblday) Location StatusStart-Up
Phillips 66 150000 Brazoria County Texas Late 2020
Phillips 66 150000 Brazoria County Texas Late 2020
Enterprise 150000 Mont Belvieu Texas Q1 2020
ONEOK 125000 Mont Belvieu Texas Q1 2021
Targa 110000 Mont Belvieu Texas Q1 2020
Targa 110000 Mont Belvieu Texas Q2 2020
Energy Transfer (Lone Star) 150000 Mont Belvieu Texas Q1 2020
Expansions = 945000 bblday
New US crackers complete under construction through 2019
CompanyC2 capacity
(ktyear)Downstream (ktyear) Location Start-Up
OxyChemMexichem 544 Feed existing VCM plant of 1050 Ingleside Texas Q1 2017
Dow Chemical 1500ELITE PE (400) LDPE (350) ndash Plaquemine Louisiana EPDM (200) elastomers (320)
Freeport Texas Q3 2017
Chevron Phillips Chemical 1725Bimodal HDPE (500) mLLDPE (500) both at Old Ocean
Cedar Bayou Texas Q1 2018
ExxonMobil Chemical 1500mLLDPE plus LLDPE (650 x2) at Mont Belvieu
Baytown Texas Q3 2018
LotteWestlake 1000MEG (760) by Lotte feed into existing PVC for Westlake
St Charles Louisiana H1 2019
Shintech 500 VCM (400) PVC (290) caustic soda (270) Plaquemine Louisiana H1 2019
Formosa Plastics 1200 HDPE (400) LDPE (400) EG (800) Point Comfort Texas H2 2019
Sasol 1500LLDPE (470) LDPE (420) EOEG (300250) ethoxylates detergent alcohols (300)
Lake Charles Louisiana H2 2019
8 new crackers from 2017-2019 = 94m tonnesyear
Expansions of existing US crackers plus 1 restart
Company Capacity (ktyear) Location StatusStart-Up
LyondellBasell 363 Corpus Christi Texas Fully started up Q2 2017
Westlake Chemical 32 Calvert City Kentucky Started up Apr 2017
Indorama (restart) 440 Lake Charles Louisiana May 2019
Dow 91 Orange Texas H1 2019
Dow 500 Freeport Texas 2020
INEOS 270 Chocolate Bayou Texas 2020
LyondellBasell 250 Channelview Texas Evaluating for 2020s
Expansions about 14m tonnesyear + new crackers 94m = 108m or over 35 of existing US capacity by 2019
North America PE expansions
Company Capacity (ktyear) Grade breakdown Location Start-Up
Dow Chemical 400 ELITE PE Freeport Texas Q3 2017
Dow Chemical 350 LDPE Plaquemine Lousiana Q4 2017
Chevron Phillips Chemical 1000 Bimodal HDPE (500) mLLDPE (500) Old Ocean Texas Q3 2017
ExxonMobil Chemical 1300 mLLDPE plus LLDPE (2 x 650) Mont Belvieu Texas Q4 2017
INEOSSasol 470 HDPE La Porte Texas Q4 2017
Dow Chemical 125 Bimodal HDPE St Charles Louisiana Q4 2018
Sasol 890 LLDPE (470) LDPE (420) Lake Charles Louisiana Q1 2019 Q3 2019
LyondellBasell 500 HDPE La Porte Texas Q3 2019
Formosa Plastics 800 HDPE (400) LDPE (400) Point Comfort Texas H2 2019
ExxonMobil Chemical 650 LLDPE Beaumont Texas 2019
TotalBorealisNOVA 625 Borstar PE Bayport Texas 2021
Shell 1600 HDPELLDPE (2x 550) HDPE (500) Monaca Pennsylvania Early 2020s
PTT Global Chemicals 700 HDPE (2x 350) Belmont County Ohio NA
NOVA Chemicals 430 LLDPE Sarnia Canada 2022
SABICExxonMobil NA PE unspec (2 units) Corpus Christi Texas H1 2022
Dow Chemical 600 PE (unspec) US Gulf Coast 2021-2023
Dow Chemical 350 PE (unspec) US global debottlenecks 2021-2023
Through 2019 = 65m tonnesyear (+39 US capacity)Through 2022 = 121m tonnesyear (+74 US capacity)
Assuming 1300kt PE for SABICExxonMobil
2nd wave of new US cracker projects
CompanyCapacity (ktyear)
Downstream (ktyear)
Location Start-up Status
TotalBorealisNOVA
1000Borstar PE (625) + existing PE (400)
Port Arthur Texas End 2020Under
construction
Shell 1500HDPELLDPE (2x 550)
HDPE (500)Monaca
PennsylvaniaEarly 2020s
Underconstruction
SABICExxonMobil
1800 PE (2 units) MEGCorpus Christi
TexasH1 2022
Underconstruction
PTTGCDaelim 1000HDPE (700) MEG (500) EO (100)
Belmont County Ohio
NA Evaluation
Formosa Petrochemicals
1200LLDPE (400) HDPE
(400) EG (900)St James Parish
Louisiana2022 Evaluation
Chevron Phillips Chemical
NA NA US Gulf Coast NAFID late 2019
early 2020
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Expansions of USGC NGL fractionation
Company Capacity (bblday) Location StatusStart-Up
Phillips 66 150000 Brazoria County Texas Late 2020
Phillips 66 150000 Brazoria County Texas Late 2020
Enterprise 150000 Mont Belvieu Texas Q1 2020
ONEOK 125000 Mont Belvieu Texas Q1 2021
Targa 110000 Mont Belvieu Texas Q1 2020
Targa 110000 Mont Belvieu Texas Q2 2020
Energy Transfer (Lone Star) 150000 Mont Belvieu Texas Q1 2020
Expansions = 945000 bblday
New US crackers complete under construction through 2019
CompanyC2 capacity
(ktyear)Downstream (ktyear) Location Start-Up
OxyChemMexichem 544 Feed existing VCM plant of 1050 Ingleside Texas Q1 2017
Dow Chemical 1500ELITE PE (400) LDPE (350) ndash Plaquemine Louisiana EPDM (200) elastomers (320)
Freeport Texas Q3 2017
Chevron Phillips Chemical 1725Bimodal HDPE (500) mLLDPE (500) both at Old Ocean
Cedar Bayou Texas Q1 2018
ExxonMobil Chemical 1500mLLDPE plus LLDPE (650 x2) at Mont Belvieu
Baytown Texas Q3 2018
LotteWestlake 1000MEG (760) by Lotte feed into existing PVC for Westlake
St Charles Louisiana H1 2019
Shintech 500 VCM (400) PVC (290) caustic soda (270) Plaquemine Louisiana H1 2019
Formosa Plastics 1200 HDPE (400) LDPE (400) EG (800) Point Comfort Texas H2 2019
Sasol 1500LLDPE (470) LDPE (420) EOEG (300250) ethoxylates detergent alcohols (300)
Lake Charles Louisiana H2 2019
8 new crackers from 2017-2019 = 94m tonnesyear
Expansions of existing US crackers plus 1 restart
Company Capacity (ktyear) Location StatusStart-Up
LyondellBasell 363 Corpus Christi Texas Fully started up Q2 2017
Westlake Chemical 32 Calvert City Kentucky Started up Apr 2017
Indorama (restart) 440 Lake Charles Louisiana May 2019
Dow 91 Orange Texas H1 2019
Dow 500 Freeport Texas 2020
INEOS 270 Chocolate Bayou Texas 2020
LyondellBasell 250 Channelview Texas Evaluating for 2020s
Expansions about 14m tonnesyear + new crackers 94m = 108m or over 35 of existing US capacity by 2019
North America PE expansions
Company Capacity (ktyear) Grade breakdown Location Start-Up
Dow Chemical 400 ELITE PE Freeport Texas Q3 2017
Dow Chemical 350 LDPE Plaquemine Lousiana Q4 2017
Chevron Phillips Chemical 1000 Bimodal HDPE (500) mLLDPE (500) Old Ocean Texas Q3 2017
ExxonMobil Chemical 1300 mLLDPE plus LLDPE (2 x 650) Mont Belvieu Texas Q4 2017
INEOSSasol 470 HDPE La Porte Texas Q4 2017
Dow Chemical 125 Bimodal HDPE St Charles Louisiana Q4 2018
Sasol 890 LLDPE (470) LDPE (420) Lake Charles Louisiana Q1 2019 Q3 2019
LyondellBasell 500 HDPE La Porte Texas Q3 2019
Formosa Plastics 800 HDPE (400) LDPE (400) Point Comfort Texas H2 2019
ExxonMobil Chemical 650 LLDPE Beaumont Texas 2019
TotalBorealisNOVA 625 Borstar PE Bayport Texas 2021
Shell 1600 HDPELLDPE (2x 550) HDPE (500) Monaca Pennsylvania Early 2020s
PTT Global Chemicals 700 HDPE (2x 350) Belmont County Ohio NA
NOVA Chemicals 430 LLDPE Sarnia Canada 2022
SABICExxonMobil NA PE unspec (2 units) Corpus Christi Texas H1 2022
Dow Chemical 600 PE (unspec) US Gulf Coast 2021-2023
Dow Chemical 350 PE (unspec) US global debottlenecks 2021-2023
Through 2019 = 65m tonnesyear (+39 US capacity)Through 2022 = 121m tonnesyear (+74 US capacity)
Assuming 1300kt PE for SABICExxonMobil
2nd wave of new US cracker projects
CompanyCapacity (ktyear)
Downstream (ktyear)
Location Start-up Status
TotalBorealisNOVA
1000Borstar PE (625) + existing PE (400)
Port Arthur Texas End 2020Under
construction
Shell 1500HDPELLDPE (2x 550)
HDPE (500)Monaca
PennsylvaniaEarly 2020s
Underconstruction
SABICExxonMobil
1800 PE (2 units) MEGCorpus Christi
TexasH1 2022
Underconstruction
PTTGCDaelim 1000HDPE (700) MEG (500) EO (100)
Belmont County Ohio
NA Evaluation
Formosa Petrochemicals
1200LLDPE (400) HDPE
(400) EG (900)St James Parish
Louisiana2022 Evaluation
Chevron Phillips Chemical
NA NA US Gulf Coast NAFID late 2019
early 2020
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
New US crackers complete under construction through 2019
CompanyC2 capacity
(ktyear)Downstream (ktyear) Location Start-Up
OxyChemMexichem 544 Feed existing VCM plant of 1050 Ingleside Texas Q1 2017
Dow Chemical 1500ELITE PE (400) LDPE (350) ndash Plaquemine Louisiana EPDM (200) elastomers (320)
Freeport Texas Q3 2017
Chevron Phillips Chemical 1725Bimodal HDPE (500) mLLDPE (500) both at Old Ocean
Cedar Bayou Texas Q1 2018
ExxonMobil Chemical 1500mLLDPE plus LLDPE (650 x2) at Mont Belvieu
Baytown Texas Q3 2018
LotteWestlake 1000MEG (760) by Lotte feed into existing PVC for Westlake
St Charles Louisiana H1 2019
Shintech 500 VCM (400) PVC (290) caustic soda (270) Plaquemine Louisiana H1 2019
Formosa Plastics 1200 HDPE (400) LDPE (400) EG (800) Point Comfort Texas H2 2019
Sasol 1500LLDPE (470) LDPE (420) EOEG (300250) ethoxylates detergent alcohols (300)
Lake Charles Louisiana H2 2019
8 new crackers from 2017-2019 = 94m tonnesyear
Expansions of existing US crackers plus 1 restart
Company Capacity (ktyear) Location StatusStart-Up
LyondellBasell 363 Corpus Christi Texas Fully started up Q2 2017
Westlake Chemical 32 Calvert City Kentucky Started up Apr 2017
Indorama (restart) 440 Lake Charles Louisiana May 2019
Dow 91 Orange Texas H1 2019
Dow 500 Freeport Texas 2020
INEOS 270 Chocolate Bayou Texas 2020
LyondellBasell 250 Channelview Texas Evaluating for 2020s
Expansions about 14m tonnesyear + new crackers 94m = 108m or over 35 of existing US capacity by 2019
North America PE expansions
Company Capacity (ktyear) Grade breakdown Location Start-Up
Dow Chemical 400 ELITE PE Freeport Texas Q3 2017
Dow Chemical 350 LDPE Plaquemine Lousiana Q4 2017
Chevron Phillips Chemical 1000 Bimodal HDPE (500) mLLDPE (500) Old Ocean Texas Q3 2017
ExxonMobil Chemical 1300 mLLDPE plus LLDPE (2 x 650) Mont Belvieu Texas Q4 2017
INEOSSasol 470 HDPE La Porte Texas Q4 2017
Dow Chemical 125 Bimodal HDPE St Charles Louisiana Q4 2018
Sasol 890 LLDPE (470) LDPE (420) Lake Charles Louisiana Q1 2019 Q3 2019
LyondellBasell 500 HDPE La Porte Texas Q3 2019
Formosa Plastics 800 HDPE (400) LDPE (400) Point Comfort Texas H2 2019
ExxonMobil Chemical 650 LLDPE Beaumont Texas 2019
TotalBorealisNOVA 625 Borstar PE Bayport Texas 2021
Shell 1600 HDPELLDPE (2x 550) HDPE (500) Monaca Pennsylvania Early 2020s
PTT Global Chemicals 700 HDPE (2x 350) Belmont County Ohio NA
NOVA Chemicals 430 LLDPE Sarnia Canada 2022
SABICExxonMobil NA PE unspec (2 units) Corpus Christi Texas H1 2022
Dow Chemical 600 PE (unspec) US Gulf Coast 2021-2023
Dow Chemical 350 PE (unspec) US global debottlenecks 2021-2023
Through 2019 = 65m tonnesyear (+39 US capacity)Through 2022 = 121m tonnesyear (+74 US capacity)
Assuming 1300kt PE for SABICExxonMobil
2nd wave of new US cracker projects
CompanyCapacity (ktyear)
Downstream (ktyear)
Location Start-up Status
TotalBorealisNOVA
1000Borstar PE (625) + existing PE (400)
Port Arthur Texas End 2020Under
construction
Shell 1500HDPELLDPE (2x 550)
HDPE (500)Monaca
PennsylvaniaEarly 2020s
Underconstruction
SABICExxonMobil
1800 PE (2 units) MEGCorpus Christi
TexasH1 2022
Underconstruction
PTTGCDaelim 1000HDPE (700) MEG (500) EO (100)
Belmont County Ohio
NA Evaluation
Formosa Petrochemicals
1200LLDPE (400) HDPE
(400) EG (900)St James Parish
Louisiana2022 Evaluation
Chevron Phillips Chemical
NA NA US Gulf Coast NAFID late 2019
early 2020
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Expansions of existing US crackers plus 1 restart
Company Capacity (ktyear) Location StatusStart-Up
LyondellBasell 363 Corpus Christi Texas Fully started up Q2 2017
Westlake Chemical 32 Calvert City Kentucky Started up Apr 2017
Indorama (restart) 440 Lake Charles Louisiana May 2019
Dow 91 Orange Texas H1 2019
Dow 500 Freeport Texas 2020
INEOS 270 Chocolate Bayou Texas 2020
LyondellBasell 250 Channelview Texas Evaluating for 2020s
Expansions about 14m tonnesyear + new crackers 94m = 108m or over 35 of existing US capacity by 2019
North America PE expansions
Company Capacity (ktyear) Grade breakdown Location Start-Up
Dow Chemical 400 ELITE PE Freeport Texas Q3 2017
Dow Chemical 350 LDPE Plaquemine Lousiana Q4 2017
Chevron Phillips Chemical 1000 Bimodal HDPE (500) mLLDPE (500) Old Ocean Texas Q3 2017
ExxonMobil Chemical 1300 mLLDPE plus LLDPE (2 x 650) Mont Belvieu Texas Q4 2017
INEOSSasol 470 HDPE La Porte Texas Q4 2017
Dow Chemical 125 Bimodal HDPE St Charles Louisiana Q4 2018
Sasol 890 LLDPE (470) LDPE (420) Lake Charles Louisiana Q1 2019 Q3 2019
LyondellBasell 500 HDPE La Porte Texas Q3 2019
Formosa Plastics 800 HDPE (400) LDPE (400) Point Comfort Texas H2 2019
ExxonMobil Chemical 650 LLDPE Beaumont Texas 2019
TotalBorealisNOVA 625 Borstar PE Bayport Texas 2021
Shell 1600 HDPELLDPE (2x 550) HDPE (500) Monaca Pennsylvania Early 2020s
PTT Global Chemicals 700 HDPE (2x 350) Belmont County Ohio NA
NOVA Chemicals 430 LLDPE Sarnia Canada 2022
SABICExxonMobil NA PE unspec (2 units) Corpus Christi Texas H1 2022
Dow Chemical 600 PE (unspec) US Gulf Coast 2021-2023
Dow Chemical 350 PE (unspec) US global debottlenecks 2021-2023
Through 2019 = 65m tonnesyear (+39 US capacity)Through 2022 = 121m tonnesyear (+74 US capacity)
Assuming 1300kt PE for SABICExxonMobil
2nd wave of new US cracker projects
CompanyCapacity (ktyear)
Downstream (ktyear)
Location Start-up Status
TotalBorealisNOVA
1000Borstar PE (625) + existing PE (400)
Port Arthur Texas End 2020Under
construction
Shell 1500HDPELLDPE (2x 550)
HDPE (500)Monaca
PennsylvaniaEarly 2020s
Underconstruction
SABICExxonMobil
1800 PE (2 units) MEGCorpus Christi
TexasH1 2022
Underconstruction
PTTGCDaelim 1000HDPE (700) MEG (500) EO (100)
Belmont County Ohio
NA Evaluation
Formosa Petrochemicals
1200LLDPE (400) HDPE
(400) EG (900)St James Parish
Louisiana2022 Evaluation
Chevron Phillips Chemical
NA NA US Gulf Coast NAFID late 2019
early 2020
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
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Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
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Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
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Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
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North America PE expansions
Company Capacity (ktyear) Grade breakdown Location Start-Up
Dow Chemical 400 ELITE PE Freeport Texas Q3 2017
Dow Chemical 350 LDPE Plaquemine Lousiana Q4 2017
Chevron Phillips Chemical 1000 Bimodal HDPE (500) mLLDPE (500) Old Ocean Texas Q3 2017
ExxonMobil Chemical 1300 mLLDPE plus LLDPE (2 x 650) Mont Belvieu Texas Q4 2017
INEOSSasol 470 HDPE La Porte Texas Q4 2017
Dow Chemical 125 Bimodal HDPE St Charles Louisiana Q4 2018
Sasol 890 LLDPE (470) LDPE (420) Lake Charles Louisiana Q1 2019 Q3 2019
LyondellBasell 500 HDPE La Porte Texas Q3 2019
Formosa Plastics 800 HDPE (400) LDPE (400) Point Comfort Texas H2 2019
ExxonMobil Chemical 650 LLDPE Beaumont Texas 2019
TotalBorealisNOVA 625 Borstar PE Bayport Texas 2021
Shell 1600 HDPELLDPE (2x 550) HDPE (500) Monaca Pennsylvania Early 2020s
PTT Global Chemicals 700 HDPE (2x 350) Belmont County Ohio NA
NOVA Chemicals 430 LLDPE Sarnia Canada 2022
SABICExxonMobil NA PE unspec (2 units) Corpus Christi Texas H1 2022
Dow Chemical 600 PE (unspec) US Gulf Coast 2021-2023
Dow Chemical 350 PE (unspec) US global debottlenecks 2021-2023
Through 2019 = 65m tonnesyear (+39 US capacity)Through 2022 = 121m tonnesyear (+74 US capacity)
Assuming 1300kt PE for SABICExxonMobil
2nd wave of new US cracker projects
CompanyCapacity (ktyear)
Downstream (ktyear)
Location Start-up Status
TotalBorealisNOVA
1000Borstar PE (625) + existing PE (400)
Port Arthur Texas End 2020Under
construction
Shell 1500HDPELLDPE (2x 550)
HDPE (500)Monaca
PennsylvaniaEarly 2020s
Underconstruction
SABICExxonMobil
1800 PE (2 units) MEGCorpus Christi
TexasH1 2022
Underconstruction
PTTGCDaelim 1000HDPE (700) MEG (500) EO (100)
Belmont County Ohio
NA Evaluation
Formosa Petrochemicals
1200LLDPE (400) HDPE
(400) EG (900)St James Parish
Louisiana2022 Evaluation
Chevron Phillips Chemical
NA NA US Gulf Coast NAFID late 2019
early 2020
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
2nd wave of new US cracker projects
CompanyCapacity (ktyear)
Downstream (ktyear)
Location Start-up Status
TotalBorealisNOVA
1000Borstar PE (625) + existing PE (400)
Port Arthur Texas End 2020Under
construction
Shell 1500HDPELLDPE (2x 550)
HDPE (500)Monaca
PennsylvaniaEarly 2020s
Underconstruction
SABICExxonMobil
1800 PE (2 units) MEGCorpus Christi
TexasH1 2022
Underconstruction
PTTGCDaelim 1000HDPE (700) MEG (500) EO (100)
Belmont County Ohio
NA Evaluation
Formosa Petrochemicals
1200LLDPE (400) HDPE
(400) EG (900)St James Parish
Louisiana2022 Evaluation
Chevron Phillips Chemical
NA NA US Gulf Coast NAFID late 2019
early 2020
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
US PE export markets
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Increasing production rising export focus
New PE capacity designed for export
US PE market maturemdashgrowth follows GDP
Despite trade tensions exports were up by at least 19 for all PE products
LLDPE saw the strongest gain in exports at around 46 over half of US LLDPE production was exported in 2018 0
5
10
15
20
25
30
35
40
45
50
HDPE LLDPE LDPE
Increase in production and exports from 2017 to 2018
Production Exports
Source ICIS Supply and Demand Database
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Export PEmdashprices trending lower as supply lengthens
Export prices have faced downward pressure on a strong dollar and rising supply
International economies are seeing some slowdown in growth adding to export price pressure
US producers are looking to raise their export allocations following capacity additions
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
LLDPE in focus
US producers are building out large volumes of LLDPE and MLLDPE capacity
Additional supply has caused premiums for hexene and metallocene grades over butene to narrow
Export markets account for over half of total US LLDPE demand
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Shifts in LLDPE trade patterns
MEXICO23
CANADA14
CHINA10BRAZIL
10BELGIUM9
COLOMBIA4
SINGAPORE4
ARGENTINA2
CHILE2
GUATEMALA1
All Others21
2017 LLDPE EXPORTS
BELGIUM16
MEXICO15
BRAZIL9
CANADA8
CHINA7
SINGAPORE5
TURKEY4
COLOMBIA4
MALAYSIA3
VIETNAM3
All Others26
2018 LLDPE EXPORTS
Source ICIS Supply and Demand Database
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Shifts in LDPE trade patterns
Source ICIS Supply and Demand Database
CANADA22
MEXICO13
CHINA11
BRAZIL7
COLOMBIA5
SINGAPORE4
CHILE4
INDIA3
ARGENTINA3
VIETNAM2
All Others26
2018 LDPE EXPORTS
CANADA24
CHINA15
MEXICO13
BRAZIL4
COLOMBIA4
CHILE3
HONG KONG 3
ARGENTINA3
PERU3
GUATEMALA3
All others25
2017 LDPE EXPORTS
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Shifts in HDPE trade patterns
Source ICIS Supply and Demand Database
MEXICO26
CANADA18
CHINA12
BRAZIL5
COLOMBIA5
CHILE3
PERU3
ISRAEL3
BELGIUM2
GUATEMALA2
All Others21
2017 HDPE EXPORTS
MEXICO24
CANADA15
CHINA13
COLOMBIA5
BRAZIL4
BELGIUM4
PERU3
CHILE2
VIETNAM2
ISRAEL2
All Others26
2018 HDPE EXPORTS
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Concluding thoughts on the impact of trade tensions
Mexico and Canada are the largest export markets and have limited realistic alternatives
Retaliatory tariffs a risk as US exporters increase presence in Europe SE Asia
US likely to take greater share of the Latin American trade may push out Asian competitors
US producers still able to sell to Chinese re-export converters
Ships in the Houston ship channel Photo by Al Greenwood
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Shale oilrsquos impact on the US propylene chain
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
bull Gas cracking is solely focussed on the production of ethylene
bull Heavier feedstocks produce significantly more co-products
Naphtha to Ethanebull95 reduction in propylenebull96 reduction in butadienebull98 reduction in raffinate-1bull98 reduction in pygas
Ethane cracking greatly reduces co-product production
Typical Yield Patterns of Different Steam Cracker
Feedstocks
00
05
10
15
20
25
30
ETHANE LPG NAPHTHA
Cum
ulai
ve y
ield
of p
rodu
cts
tonn
e Ethylene Propylene Butadiene
Raffinate-1 Pygas Fuel oil
Source ICIS Consulting
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Refineries a key source of US propylene
Refineries account for more than half of US propylene production
Refinery-grade propylene (RGP) can be used in gasoline blending or upgraded to chemical-grade (CGP) or polymer-grade (PGP) propylene
0
10
20
30
40
50
60
70
80
90
100
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
US propylene production by source
Chemically-sourced propylene Refinery-sourced propylene
Source AFPM
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
No lasting US advantage in propylene costs
Propane has alternate demand outlets unlike ethylene
US relying on PDH and other on-purpose technology to make up lost propylene production from crackers
US propylene cash costs similar to those of Asian and European producers
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
North America on-purpose propylene projects (PDH)
CompanyCapacity
ktyearLocation Start-up Status
Enterprise Products 750 Mont Belvieu Texas Nov 2017 Running
Formosa Plastics 600 Point Comfort Texas 2020-2021 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Pembina PipelinePIC
(Kuwait)544 Alberta Canada --- FID March 2019
Formosa Plastics 600 Louisiana --- Evaluating
LyondellBasell 500 US --- FID pending
BASF (MTP) 475 Freeport Texas --- On hold
NOTE Others by Ascend Performance Materials Sunoco Dow Enterprise REXtac cancelled
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
PP projectsmdashfewer in number and smaller in capacity
Company Capacity ktyear Location Start-up Status
Braskem 450 La Porte Texas Q1 2020 Under construction
Inter Pipeline 525 Alberta Canada Late 2021 FID made Dec 2017
Formosa Plastics 250 Point Comfort Texas ---FID made detailed design
phase
PembinaPIC (Kuwait) 544 Alberta Canada --- FID March 2019
LyondellBasell 500 US --- FID pending
Formosa Plastics 600 Louisiana --- Permitting
ExxonMobil 400 Louisiana US 2022 FID made
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
PP exportsmdashoverwhelming majority to Mexico and Canada
Source ICIS Supply and Demand Database
MEXICO49
CANADA28
CHINA7
PERU2
VIETNAM1
All Others13
PP EXPORTS 2017
MEXICO52
CANADA31
CHINA2
BELGIUM2
VIETNAM2
All Others11
PP EXPORTS 2018
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Deepwater arbitrage for PP tofrom the US
US PP prices fluctuate directly with propylene
Deepwater trade flows may result in more imports or more exports according to arbitrage
US PP prices have moved from globally uncompetitive to globally competitive over the past year
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asian and Middle Eastern polymer markets brace for shifting trade winds
23 May 2019
Veena Pathare
Senior Editor Manager
ICIS Editorial
Chinaplas 2019
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
wwwiciscom 36
Agenda
US-China trade war amp impact on Asian polyolefin markets
Impact of new capacities on future trade flows
H2 2019 outlook
US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
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Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
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Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
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Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
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US-China trade war amp impact on Asian polyolefin markets
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
A look back on escalating US-China trade tensions
$110bn
Product Initial Tariffs Final tariffs after 25 hike implemented on 28 Aug 2018
Total China imports in 2017 (million tonnes)
Estimated share of US materialin China imports in 2017
LDPE 65 Not included remains at 65 24 7
HDPE 65 315 64 5
LLDPE 65 315 33 5
PP 65 315 47 3
Total US Tariffs $250bn
Total Chinese Tariffs $110bn
Source ICIS Supply and Demand database
20256302224395
791675
1852458
1211
31
13
0
5
10
15
20
25
30
35
0
500000
1000000
1500000
2000000
2500000
2017 US Export Volumes (tonnes)
Total volume of global exports of exports to China
Source ICIS Supply and Demand database
HDPE LLDPE LDPE PP
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asia LLDPE prices decline on weaker sentiment after tariff announcementstabilises in early 2019
2
-2
2
-2
-3
-4
2
-5
-4
-3
-2
-1
0
1
2
3
900
950
1000
1050
1100
1150
1200
1250
1300
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia LLDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 off to a bullish start buoyed by pre-Lunar New Year buying
US tariffs on Chinese exports announced in mid-June
With the tariffs imposed US cargoes are directed to other regions outside of China Chinese prices find some stability in Q3 while SE Asia prices come under continued pressure
Sharp depreciation of Chinese yuan weighs heavily on import market
Prices stabilise as yuan strengthens and trade talks begin
Source ICIS
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Asia HDPE prices largely supported fell in Q4 2018 on longer supply
2
-2
2
-3
-2
-5
2
-5
-4
-3
-2
-1
0
1
2
3
900
1000
1100
1200
1300
1400
1500
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia HDPE price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Q1 largely supported by tight supply amid strong PE pipe market
US tariffs on Chinese exports announced in mid-June
Prices rebound amid plant maintenance season in China
Fears of US-China trade war and local currencies depreciation add to bearish sentiment
Prices plunged in late 2018 on increased supply and availability of competitively priced cargoes
Source ICIS
Prices remain under pressure amid weak downstream demand
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Reduced PE exports from the US to China others fill the gap
Source ICIS Supply and demand database
0
200000
400000
600000
800000
1000000
1200000
1400000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
LLDPE imports to China 2016-2018 (tonnes)
SINGAPORE SAUDI ARABIA THAILAND UNITED ARAB EMIRATES
SOUTH KOREA UNITED STATES IRAN QATAR
INDIA OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
HDPE imports to China 2016-2018 (tonnes)
SAUDI ARABIA IRAN UNITED ARAB EMIRATESSOUTH KOREA THAILAND TAIWAN PROVINCE OF CHINAUNITED STATES KUWAIT QATAROTHERS
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
India remains unattractive for both Middle Eastern US PE sellers
900
950
1000
1050
1100
1150
1200
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
LLDPE netback Mideast to China=CFR China-freight
LLDPE netback Mideast to India = CFR India-freight
LLDPE netback Mideast to SEA=CFR SEA(dut)-freight
LLDPE netback Mideast to Turkey=CFR Turkey-freightSource ICIS
India poised to see 11 growth in LLDPE demand HDPE to remain flat in FY 2018-2019
India remains an unattractive market for LLDPE HDPE imports
Ample domestic availability
Import prices influenced by domestic product
Indian PP import prices capped by domestic price parity
According to market estimates
Netbacks to FOB Middle East - LLDPE film
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
02-Apr-2018 04-Jun-2018 06-Aug-2018 08-Oct-2018 10-Dec-2018 18-Feb-2019
HDPE netback Mideast to China = CFR China-freight
HDPE netback Mideast to India=CFR India-freight
HDPE netback Mideast to SEA=CFR SEA (dut)-freight
HDPE netback Mideast to Turkey =CFR Turkey-freight
Netbacks to FOB Middle East - HDPE film
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Indian PE exports surge bulk of it to China
China 63Indonesia 9
Vietnam 6
Bangladesh 4
Pakistan 4
Turkey 4
Nepal 2
Kenya 1
Malaysia 1
Others 7
Indian LLDPE exportsFY 2018-2019 (Apr-Feb)
LLDPE exports = 47319 KT
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2014-15 2015-16 2016-17 2017-18 2018-19 (Apr-Feb)
India PE exportsFY 2018-2019 (Apr-Feb)
HDPE LLDPE LDPE
Ton
nes
Source ICIS Supply and Demand database
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
US cargoes emerge in Indonesia LLDPE price spread widens
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Indonesian LLDPE imports2016-2018 (tonnes)
INDIA JAPAN KUWAIT
MALAYSIA QATAR SAUDI ARABIA
SINGAPORE SOUTH KOREA THAILAND
UNITED ARAB EMIRATES UNITED STATES OTHERS
950
1000
1050
1100
1150
1200
1250
1300
1350
LLDPE import prices in Indonesia (USDtonne)
PE LLDPE Film CFR Indonesia - Low end
PE LLDPE Film CFR Indonesia - High end
Source ICIS Supply and Demand database Source ICIS
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Vietnam Another major destination for US cargoes
VietnamZero duty level playing ground for all
Little or no duty advantage for ASEAN cargoes
Malaysia Big converters and re-exporters benefit from
import duty exemption
Local converters prefer ASEAN or local cargoes -higher import duty for dutiable cargoes (10)
ThailandNet exporter less reliance on imports
Preference for local cargoes relatively low import duty (3)
10000
10500
11000
11500
12000
12500
13000
Dutiable and non-dutiable LLDPE prices in SE Asia ($tonne)
Dutiable LLDPE Non-Dutiable LLDPE
For LLDPE price gap widened from late 2017 up to more than $100tonne
Source ICIS
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
MLLDPE Wide spread over C4 LLDPE hampers demand
1050000
1100000
1150000
1200000
1250000
1300000
1350000
1400000
Asian C6 MLLDPE prices
PE LLDPE C6 Metallocene CFR SE Asia PE LLDPE C6 Metallocene CFR China
PE LLDPE C6 Metallocene CFR India
0
50
100
150
200
250
C6 MLLDPE - LLDPE film price spread
Source ICIS
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Trade war no impact on PP lengthened availability of Indian exports in Q3 weighs on spot prices
3
-2
-1
-10
4
1
-12
-10
-8
-6
-4
-2
0
2
4
6
900
950
1000
1050
1100
1150
1200
1250
1300
1350
05-Jan-2018 16-Feb-2018 30-Mar-2018 11-May-2018 22-Jun-2018 03-Aug-2018 14-Sep-2018 26-Oct-2018 07-Dec-2018 25-Jan-2019 08-Mar-2019
Asia PP flat yarn price Jan 2018 ndash Mar 2019 ($Tonne) Week on week change CFR China CFR SE Asia (dutiable)
Chinese import prices plummet in Q3 due to a sudden spike in exports from India as suppliers there seek to clear on-hand cargoes
Start up of new PP plant in Vietnam lengthens regional supply Build-up of domestic
inventory levels in China after the Lunar New Year holiday
US tariffs on Chinese exports announced
Prices supported by tight supply ndash unexpected turnarounds in Q1 2019
Source ICIS
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Middle Eastern PP exports affected by outages
Slew of scheduled and unexpected outages in the Middle East have capped PP export availability since August 2018
Source ICIS
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Chinarsquos PP imports ndash South Korea GCC dominant sources
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Total PP imports to China 2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIA
TAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAM
MALAYSIA UNITED STATES OTHERS
GCC ndash 22 of total Chinese imports
China moves closer to self-sufficiency imports continue
China to provide price direction for global markets despite rise in self-sufficiency
Source ICIS Supply and Demand database
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Indian Q1 2019 netbacks increase on tight Middle Eastern supply
Netbacks to FOB Middle East from
India on an uptrend since January
2019 but trades remain limited
0
50000
100000
150000
200000
250000
300000
1st 2016 2nd 2016 3rd 2016 4th 2016 1st 2017 2nd 2017 3rd 2017 4th 2017 1st 2018 2nd 2018 3rd 2018 4th 2018 1st 2019(Jan-Feb)
Total PP imports to India2016-2019 (tonnes)
UNITED ARAB EMIRATES SAUDI ARABIA SINGAPORE
THAILAND SOUTH KOREA KUWAIT
OMAN UNITED STATES OTHERS
Source ICIS Supply and demand database
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Tight Middle East supply narrows spread in SE Asia
10000
10500
11000
11500
12000
12500
13000
13500
Dutiable and non-dutiable PP Flat Yarn prices ($tonne)
Dutiable PP Yarn Non-dutiable PP Yarn
For PP flat yarn price gap narrowed in 2018 to consistently below $50tonne
on tight Middle East supply
Source ICIS
Price difference reduced to an all-time low of $5tonne in late-April 2019
Spread between the two expected to remain narrow
Availability of non-dutiable cargoes to lengthen with several start-ups in SE Asia
Static expansions in the Middle East in contrast
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Tariff impact on US and China Trade
0
2000
4000
6000
8000
10000
12000
14000
Round 2 (Aug 2018) Round 3 (Sep 2018)
Exports under tariff based on 2017 trade flows
US exports impacted China exports impacted
$ millions
$20bn $22bn
$88bn
$132bn
Source American Chemistry Council US International Trade Commission
Impact on Chinarsquos finished plastic exports to US
0
2000
4000
6000
$ millions
Round 2 Round 3
The US imported $39bn of finished plastics products from global sources in 2017
Chinarsquos combined total of $7bn made up around 30 of total US imports of the particular products but merely 18 of total imports
$14bn
$56bn
An estimated 26m tonnes of annual Chinese plastic products demand might be lost as a result of these tariffs
67 of the demand is for products made from polyolefins
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Impact of new capacities on future trade flows
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Evolving PE trade flows as US producers redirect cargoes
Source ICIS
PE estimated global trade flow 2020（rsquo000 tonnes）
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
US PE exports diverted away from China to SE Asia
69749
28424
60496147989
0
10
20
30
40
50
60
70
80
90
100
Jul 2018 Oct 2018
US PE exports Jul vs Oct 2018 ()
NORTH AMERICA SOUTH amp CENTRAL AMERICA EUROPE
EASTERN EUROPE AFRICA MIDDLE EAST
CHINA REST OF ASIA
(41325)
38035
16160
14757
10299
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Changes in US PE exports to Asia ndashJul vs Oct 2018
CHINA VIETNAM MALAYSIA SINGAPORE INDONESIA
Source ICIS Supply and Demand database() Volumes in tonnes
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Source ICIS
Middle East to remain major PP global supplier northeast Asia emerges as net exporter
PP estimated global trade flow 2020（rsquo000 tonnes）
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
China PE PP expansions ndash inching towards PP self-sufficiency
SourceICIS
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
US historically not a key PP exporter to China Chinese export volumes expected to grow on rising self-sufficiency
0
20000
40000
60000
80000
100000
120000
140000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
China PP exports2016-2018 (tonnes)
VIETNAM HONG KONG THAILANDJAPAN PERU INDONESIAINDIA MALAYSIA TAIWAN PROVINCE OF CHINAUNITED STATES OTHERS
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Chinese PP imports2016-2018 (tonnes)
SOUTH KOREA SINGAPORE SAUDI ARABIATAIWAN PROVINCE OF CHINA UNITED ARAB EMIRATES THAILAND
JAPAN INDIA VIETNAMMALAYSIA UNITED STATES OTHERS Source ICIS Supply and demand database
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Who will supply China with PP
Source ICIS Supply and Demand database
0
50000
100000
150000
200000
250000
300000
South Korea PP exports by country 2016-2019 YTD (tonnes)
CHINA VIETNAM TURKEY HONG KONG JAPAN UNITED STATES OTHERS
China inches toward PP self-sufficiency
Focus on homopolymerbefore pushing toward copolymer self-sufficiency
South Korea to remain a key exporter to China
Another 2m tonnesyear of South Korean PP capacity expected to come on stream by 2021
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
SourceICIS
Asia leads the way for PP expansions
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Iran sanctions ndash Effect on China imports likely limited
000
5000000
10000000
15000000
20000000
25000000
30000000
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Iranian PE import volume in China
LDPE LLDPE HDPE
Grade 2017 2018 Growth ()
LDPE 604802 584880 -33
LLDPE 165429 214876 299
HDPE 1197220 1085344 -93
Total 1967451 1885100 -42
US sanctions on Iranrsquos oil and petrochemical products were re-imposed on 5 November but China will likely continue to import a significant PE volume from Iran
Knee-jerk reaction after sanctions were re-imposed
Iranian PE import volume to China (lsquo000 tonnes)
Source ICIS Supply and demand database
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
The Chinese governmentrsquos response so far
Increase in export tax refund rates for plastics and plastic products tied to VAT rate to 16 on 1 November 2018 (13 as of 1 April 2019)
Increase competitiveness of Chinese polyolefin exports
Reduce the value-added tax (VAT) for the manufacturing sector effective 1 April 2019Increase margin for local plastic manufacturers
Product Export Rebate
LDPE 16 13 (as of April)
HDPE 16 13 (as of April)
LLDPE 16 13 (as of April)
Product Export Rebate
PP homopolymers 16 13 (as of April)
PP copolymers 9 (no change)
Other PP grades 13 (no change)
Import price ($tonne)
Import cost on 16 VAT (CNYtonne)
Import cost on 13 VAT (CNYtonne)
Selling price in yuan-based import market (CNYtonne)
Margin on 16 VAT (CNYtonne)
Margin on 13 VAT (CNYtonne)
$1000 CNY8489 CNY8273 CNY8600 CNY111 CNY327
The yuan-denominated import cost takes into account an exchange rate of CNY675 to $1 a 65 import duty and assumed port fees of CNY150tonne while margin is computed as selling price less import cost
Source China Finance Department
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Outlook for 2019
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
2019 outlook for the polyolefins market
bull Additional capacities in China and SE Asia expected to come on stream in H2 2019bull US PE start-ups threaten oversupply in H2 2019 more US PE could flow to SE Asia should
US-China trade war persist bull Steady increase in Chinarsquos PP export volumes to SE Asia
bull Sustainability and plastic waste are key issues in 2019 and beyond ndash global efforts neededbull Upstream crude and monomer cost prices their effects on regional operating ratesbull Volatile exchange rates against a backdrop of uncertain global macroeconomic outlook
Demand
Supply
Other factors
bull Demand seasonally peaks in April buying to slow as Eid holiday approaches bull Some uptick expected in Q3 ahead of the year-end closebull Indian imports dictated by domestic supplier prices
bull Pro-consumption government policies reduction in VAT and increased export tax rebate could support Chinese demand
bull Slower growth 5-6 growth expected for PE 6-7 for PP bull Uncertainty dampens sentiment
Rest of Asia amp Mideast
China
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Copyright copy 2019 ICIS ndash Private amp Confidential
China has been importing 45-70 of the worldrsquos total waste around 75m tonnes in 2016Easier for developed countries to sell their recycled plastic scrap to Asia than process it at home
From January 2018 China refused to buy any recycled plastic scrap reducing imports volume to an estimated 15m tonnes in 2018
Stricter environmental control
Hundreds of small-operation Chinese plastics recyclers relocated to other southeast Asian countriesSome countries are overwhelmed by the sheer volume and are refusing to take any more waste imports
Demand for virgin resin to see boost by the ban in waste plastic imports
Chinas ban on scrap imports shifts waste crisis to southeast Asia
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
Copyright copy 2019 ICIS ndash Private amp Confidential
What lies ahead
Supply chain logistics management to assume greater role
Increase in number of trans-shipment warehousing hubs
A more even playing field for PE producers worldwide
Wider choice of sellers and buyers
US suppliers need to find buyers for surplus volumes due to unavailability of China market
Profitability of warehousingtrans-shipment hubs
Challenges
Opportunities
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
wwwiciscom 2
NEW Petrochemicals Analytics Solutions
The tools you need to stay ahead of the changing Asian polyolefins industry
Unrivalled pricing information
Live Supply Disruption Tracker - Real-time view of global supply plant outages and start-ups for the next 12
months plus the impact of these changes on supply volume
Live Disruptions Impact Tracker A tool visualising supply disruptions with an impact view connecting
downstream shutdowns to show consumption capacity loss in real time
Price Drivers Analytics - Key performance indicators such as importexport parity feedstock and downstream
spreads substitution trends and arbitragenetback data
Price Optimisation Analytics ndash Interactive map identifying net price differences between regions factoring in
freight and duties costs
Margin Analytics ndash Actionable data on variable costs and margins
Quarterly Supply and Demand Outlook - Available for key chemical commodities
Request a free
sample report gtgt
Request a demo gtgt
Support your daily trading activities with unbiased price assessments and commentary on price movements
and trends available in both English and Chinese
bull Import and export spot and contract prices
(CFR FOB DEL China domestic prices)
bull Commentary on supplydemand trading
activity and updownstream markets as well
as changes in government policies
bull Trades bids offers and contracts information
bull Plant and production news
bull Supply and demand trade flow insight
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
wwwiciscom 2
Supply and demand database
Other essential tools for navigating the polyolefins industry
Asia Polyolefins Price Forecast Reports
Determine the best time and price to buy and sell PP and plot price points against alternative scenarios
bull A rolling 12-month price forecast for China and southeast Asia (CFR assessments)
bull Upstream price forecast for 12 months ndash ethylene propylene naphtha and crude oil
bull Market review and analysis including trade flows and an economic outlook for polyolefins in the
coming 12 months
bull Scenario overview of Chinarsquos polyolefins imports and production against local consumption ndash base
case and alternative situation
Get an end-to-end perspective across the global polyolefins supply chain enabling you to
grasp the local or regional scenario in a global context The data includes import and
export volumes consumption plant capacities production and product trade flows ndash from 1978 up to 2040
Enquire about the
reports gtgt
Request a demo gtgt
