Wood Mackenzie has published a report predicting the start of a downcycle in China’s petrochemical industry.
A supply overhand has already hit the country’s paraxylene market, with olefins and polyolefins markets almost certain to face the same.
Weak global economic growth, the US-China trade war, a decrease in automobile production, and a booming e-commerce industry influencing China’s polyolefins market last year.
The country’s PE and PP incremental growth captured 69 per cent and 61 per cent of total global PE and PP incremental demand respectively.
However, robust domestic demand and a weak export market forged different demand patterns between PE and PP last year.
William Liu, Senior Consultant for Wood Mackenzie, said: “We expect polyethylene, benefitting from the e-commerce boom, to achieve a higher-than-GDP growth rate for 2019, at around 7.5 per cent.”
“However, polypropylene demand, impacted by weak global economic growth and automobile production, is expected to have grown at 5.9 per cent, just below the GDP growth rate.”
“Although we expect healthy polyethylene demand in 2020, the capacity addition is outpacing demand, which will cause market imbalance. The overcapacity may weigh on operation rates.”
“What is making market sentiment worse is that it is just the beginning of the overcapacity cycle. Meanwhile, polypropylene is facing a more severe market. Slower demand growth dragged down by raffia, automobile, and home appliances, coupled with new capacity additions will dampen operation rates significantly.”