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August 17, 2020

Global Polyolefins Market Snapshot

Following the slowdown in global economic growth in 2018 and 2019, the global economy has plunged into a contraction of unprecedented severity as a result of the COVID-19 pandemic.  The situation remains volatile, and global infection rates continue to climb with country wide and regional lockdowns in place.  In June 2020, the IMF revised its economic projections for 2020 and 2021 for the second time this year as the COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated and the recovery is projected to be more gradual than previously forecast.

Global demand for all polyolefins was 176 million tons in 2019, an increase of 2.6 percent from 2018.  However, due to the impact of COVID-19, the global polyolefins market is expected to contract by one percent in 2020, less severe than the GDP outlook for 2020.

Resilience of the polyolefins business has been demonstrated by its use in consumer and medical packaging, as well as personal protective equipment (PPE) that are essential to the pandemic response. However, considerable decline has occurred in automotive output - exacerbated by the COVID-19 crisis and construction activities.  

Asia Pacific consumes over half of the world’s polyolefins, with China accounting for close to 34 percent of global demand on its own.  The next largest consuming regions are North America and Western Europe.  However, demand in North America declined by 2.7 percent while Western Europe settled flat in 2019.

Despite polyolefins demand growth slowing on average in 2019 globally; Chinese demand remained strong in 2019, contributing close to 82 percent of total global polyolefins consumption growth.  Imports from the United States to China fell by above 60 percent in 2019 as a result of the retaliatory duties imposed by China on polypropylene, HDPE and LLDPE, which had generated export opportunities for other regions such as Middle East, Eastern Europe and other Asian countries.  However, LDPE was excluded and imports from the United States increased by around 80 percent in 2019.  From December 2019, certain grades were excluded from the imposed duties due to availability, i.e. metallocene HDPE, C8-LLDPE and impact copolymer polypropylene.  In Feburary 2020, China announced that importers could submit exclusion applications for all LLDPE, HDPE and polypropylene from March 2020, and therefore the import level from United States may increase. 

Asia Pacific remains the growth engine of the global polyolefins market, with China leading the pack.  Growth in India and South-East Asia particularly Vietnam has been substantial in percentage terms, due to the relocation of polyolefins converters from China and own development of downstream manufacturing.  The region calls for polyolefins capacity development and the scale of capacity development in China and to a lesser extent, South Korea, India and South-East Asia in the medium term is far beyond forecasts for consumption growth.  However, the region is expected to remain in considerable production deficit.

The COVID-19 pandemic has undoubtedly reduced the extreme negative public sentiment regarding plastics and the positive role of plastics in hygiene and healthcare has reduced the clamour to impose additional taxes on its use.   However, the plastics industry still bears the brunt of negative sentiment regarding plastics pollution in the environment.  Brand owners are increasingly active in combatting the negative associations regarding their use of plastic packaging, and are in some cases prepared to pay a premium over virgin polymer prices for recycled materials.  The penetration of recycled plastics into the virgin plastic markets will continue to be limited by the collection of consumer waste, limitations in sorting technologies, low virgin prices, and complex packaging designs that are often deemed unrecyclable It is unclear how far these sentiments spread beyond Europe, and there is particularly low sensitivity to environmental issues and the proposed benefits of plastics recycling in the developing regions where most of the polyolefins consumption growth is forecast.  Notwithstanding the above, the global polyolefins market is expected to mature in the long term.  Higher than GDP growth enjoyed by LLDPE, polypropylene and HDPE is expected to wane in the longer term.  LDPE growth had already fallen below GDP due to substitution that has however more or less taken its course.

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Market Analytics: Polyolefins - 2020 provides analysis and forecast to 2045 of supply and demand of the global polyolefins markets, including low density polyethylene (LDPE), linear low density polyethylene (LLDPE), high density polyethylene (HDPE) and polypropylene.  This analysis identifies the issues shaping the industry as well as provide detailed demand breakdown by end-use and supply, demand and net trade data for 40 countries.

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