Global polyolefin market indicators will remain depressed

Speaking at the K show in Dusseldorf, Germany, ICIS analyst Lorenzo Meacha said it could take until 2035 for global polyolefin facility capacity utilisation to reach pre-Covid-19 levels as new capacity is added to meet slowing demand.

He said a large amount of polyethylene (PE) and polypropylene (PP) capacity due to come on stream in the next five years would face the economic slowdown. This will affect the demand for both products. In Europe, PE and PP production margins have fallen 23 per cent and 36 per cent, respectively, so far this year, which will drag down global polyolefin margins in the short term, according to Emiliano Basualto, another ICIS analyst.

Mr Meacha said the global polyolefin market was still expected to grow in the coming years, but forecasts for this year's market growth rate had been cut after the Russia-Ukraine conflict led to a sharp rise in energy prices and the subsequent recession. ICIS believes global polyolefin demand will grow by 3% in 2022, compared to an average growth rate of 3.8% from 2021 to 2026. However, global polyolefin production capacity is expected to increase by 23% between 2021 and 2023. In 2023 alone, the new capacity will bring 17.5 million tonnes of PE and PP to the market. As a result, weaker demand and increased capacity will result in a 7% decline in global polyolefin unit capacity utilization from 2019 to 2025.

Mr Basualto said the average cost of producing PE across all varieties in the European region had risen sharply since June. For example, producers of high-density polyethylene (HDPE) experienced a 25% increase in production costs, while those of low-density polyethylene (LDPE) and linear low-density polyethylene (LLDPE) rose 16% and 22%, respectively. PP production costs have risen at a slower rate, but are also up 13 per cent since June. European demand for PE, on the other hand, is expected to fall 0.6% this year, but PP demand is expected to grow 2.2%.