Polyolefins Outlook is for Continued Slowed Growth

Expect further contraction in demand for polyolefins at least for the first half of this year, says Joel Morales, v.p. polyolefins Americas for Chemical Market Analytics by OPIS, a Dow Jones company. At the recently-held SPE International Polyolefins 2023, Morales gave a presentation on the global polyolefins market. He noted that while 2023-2024 might be a tough year, it will signal the return to “real buying” versus the 2021-2022 timeframe.

Overall contributing factors cited include high inflation and geopolitics which threaten PP and PE demand and margins. This, while supply is shifting to longer with global capacity growth, particularly in the case of PP. On the domestic front, he noted improved logistics, with port conditions improving and exports ramping up. He also noted that there will be plenty of affordable virgin polyolefin material, which will “win out” during inflation over recycled material. Some key takeaways on PP and PE for this year:

Polypropylene

 ▪  China is becoming self-sufficient in PP and is exporting a lot of material.

 ▪  Operating rates for PP will be low in the high 70s percentile worldwide in the short term.

 ▪  PP margins are at bottom and PP operators are in survival mode.

 ▪  World PP capacity additions are outpacing demand growth.

 ▪  Major new capacity in the 2022-2023 timeframe has been brought on in North America by Heartland Polymers and ExxonMobil. Other new capacity is scheduled for startup from Invista in fourth quarter and Formosa Plastics in first quarter 2024.

Polyethylene

 ▪  China is not self-sufficient in PE so the outlook is better overall.

 ▪  Recent overbuild in capacity will take time to absorb.

 ▪  The global PE nameplate operating rate is trending toward a trough (the lowest, since 1985). Still, operating rates this year will be in the low 80s percentile range, with LDPE perhaps a bit higher.

 ▪   More major new capacity, expected to make a full impact primarily on the second half of the year, includes: Shell with injection molding, film grades, including metallocene resins; Bayport Polymers with its Borstar HDPE pipe and blow molding resins; and Nova Chemicals, with new capacity of octene LLDPE and single-site catalyst materials.