AN analysis of China’s polyethylene imports signals a swinging of its import sources away from Asia to the Middle East. China is an important market because the country is still using imports to cover 7 million tonnes per year (mtpy) or more of its total polyethylene demand of 16 mtpy, while continuing to boost domestic output capacity to improve self-sufficiency in petrochemical products. Asian polyethylene producers had been enjoying positions as principal suppliers to the market for many years.
Under the Chinese government’s 12th five-year plan the 12.5 development programmes for the country’s petrochemical industry and olefin sector projected domestic demand of 38 mtpy of ethylene equivalent in 2015 and laid out a strategy to increase domestic ethylene output capacity by 11.8 mtpy from 15.2 mtpy at the end of 2010 to achieve a goal of 27 mtpy in 2015.
For ethylene, a Japanese trading-house official, voicing a common view, says: “Demand is projected to grow at an annual rate of 10 per cent and domestic capacity at 15 per cent, so imports will likely be restrained.” The official predicts that the players will change, with more polyethylene coming from the Middle East and shale-gas-derived polyethylene from the US spreading in the near future, which will make Asian suppliers’ positions more shaky.
MIDEAST DOMINANCE RISING
Worries about structural change caused by a flow of petrochemical products with overwhelming cost competitiveness from the Middle East into Asian markets, especially mega-market China, previously proliferates as the “2006-2007 issue,” but the effects were postponed as many petrochemical projects in the Middle East were delayed. Although no dramatic upheaval emerged, the dominance of Middle Eastern products is gradually, but surely, rising.
The transformation is thrown into sharp relief by comparing China’s polyethylene import volumes in 2009 and 2011, broken down by import source. Imports of low-density polyethylene (LDPE), high-density polyethylene (HDPE) and linear low-density polyethylene (LLDPE) from the Middle East accounted for less than 30 per cent of their corresponding total import volumes in 2009, but the shares climbed to about 40 per cent for LDPE and LLDPE and almost 50 per cent for HDPE in 2011.
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Middle Eastern products’ dominance is rising |
The trend continued into the January-June first half of 2012, when China imported some 1.84 million tonnes of HDPE, up 11.6 per cent year on year, with volumes jumping 55.4 per cent from top-ranked source Iran, 24.2 per cent from second-ranked Saudi Arabia and 22.8 per cent from fourth-ranked UAE while dropping for South Korea and Thailand, the two other sources among the top five. The average per-tonne prices of the Korean and Thai exports exceeded the overall average per-tonne price.
NEW STRATEGIES NEEDED
With no increase in import volume expected due to domestic capacity expansion in China, Asian polyethylene manufacturers will need to alter their strategies in consideration of a supply landscape with a greater presence of Middle Eastern products. The trading-house official says that the Middle Eastern imports were mainly for applications such as packaging materials, with imports still minor for applications that required high quality and reliability like automotive parts. He adds that other overseas players would be shifting to products that were general purpose but difficult for Chinese producers to make.
CHINA, MIDEAST COMPETE
The booming methanol market will generate huge revenues for economies in Asia and the Middle East: According to recent studies by GBI Research, already in 2010 the Asia–Pacific region accounted for 64 per cent of the global methanol demand.
With the recent boom in bio fuels and bio based petrochemical raw materials, especially Asian markets like China and the Middle East could become the centre of the world’s methanol economy, indicates a new report by GBI research.
Currently, the analysts estimate the global methanol demand is approximately 44.9 million tonnes per year (mtpy), with almost 25 per cent of this demand stemming from applications in the energy sector. Methanol and its chemical derivatives are traditionally used in a variety of industrial and consumer products, such as packaging, paints and adhesives.
TO REPLACE NAPTHA–CRACKING
GBI expects a great future demand for this alcohol from gasoline blending, methanol-to-olefins (MTO) and methanol-to-propylene (MTP), with the MTO/MTP growth being partially due to attractive cost advantages compared to traditional crude oil based naphtha-cracking. Especially in North America, the recent shale gas boom has seen natural gas derivatives displacing naphtha-based cracking within the petrochemical industry, due to the high cost of crude oil.
CHINA POTENTIAL NO 1 PRODUCER
With already 64 per cent of global methanol demand during 2010 stemming from Asia–Pacific, the region is expected to maintain this dominance in the future. Especially China has rapidly emerged as a global petrochemical products manufacturing hub, during the past decade. With producers enjoying the advantage of having relatively low operating costs, the country boasts a huge concentration of global methanol players setting up operations. If this development continues, China might well become the leading methanol market in the immediate future, GBI expects.
COMPETITION FROM THE MIDEAST
The other dominating market is the Middle East with its access to low cost natural gas feedstock, making methanol production in this region highly cost-effective. This boosts the attraction of the region’s methanol industry, and there has already been a recent increase in capacity additions as a consequence. Analysts estimate that this development may result in increased exports from the Middle East, and if the same trend continues, other regions will suffer in the wake of rising competition.
HUGE POTENTIAL
Global methanol demand stood at 26.6 million tonnes in 2000, before increasing to 44.9 million tonnes in 2010 at a CAGR of 5.4 per cent. Global demand for methanol will increase to reach 122.6 million tonnes by 2020, demonstrating a CAGR of 10.6 per cent during 2010-2020.
