LDPE Supply & Demand

By Wang Ying, Tianjin Petrochemical Co., Ltd. Transportation and Sales Centre

Demand

As of November 2016, demand for LDPE (low density polyethylene) in China is 4 446.8 kt. Sixty eight percent of that is used to manufacture films. LDPE is also used in making coatings, electric cables, and in injection molding.
Demand of coating-grade LDPE accounts for only around 5% of the domestic total (see Figure 1). Only Yanshan Petrochemical Co., Ltd. produces coating-grade LDPE, and the firm has high market status. The selling price of such product is also much higher than general-purpose LDPE. The price of PE1C7A in North China in mid-December 2016, for example, was around RMB1 700/t higher than that of PE2426H. The LDPE sector, therefore, still presents a considerable opportunity for development.
Due to a slowdown of demand growth, demand for LDPE is likely reach 6 069 kt in 2020, with average annual growth of around 4.4%.

LDPE units favored by coal chemical enterprises

Coal chemical enterprises are increasingly enthusiastic to construct LDPE units in recent years. Two units developed by coal chemical enterprises are already in normal production: The 300 kt/a unit of Shenhua Shenmu Coal Chemical Industry Co., Ltd. started production in 2015, and the 270 kt/a unit of Shenhua Xinjiang Coal Chemical Industry Co., Ltd. started production in 2016. China’s LDPE capacity has reached 2 860 kt/a, and output is 2 677 kt/a (see Figure 2). Quite a few more LDPE units are planned here, so the country’s LDPE self-sufficiency is likely to rise.
LDPE capacity expansion has increased the supply and enhanced competitiveness, and the mainstream price has started to come down. The decline in cost has helped increase the proportion of LDPE output that is consumed in making agricultural films. Demand for LDPE in China is expected to increase to around 5 204.1 kt in 2016 (see Figure 3).

Foreign trade

China imported around 1 837 kt of LDPE during January-November 2016, a drop of around 171 kt from 2 008 kt in the same period of the previous year.
The Middle East supplied around 52% of the LDPE imported by China in 2016. Iran, Saudi Arabia and Qatar were the major countries (see Figure 4). The Far East and Southeast Asia came next, supplying 17% and 14%, respectively. Prices differed greatly. As the LDPE from the Middle East was mostly general-purpose film-grade variety, the prices were relatively low. LDPE imported from Far Eastern countries such as Japan and Korea was mostly high-end special coating-grade, and the prices were quite high.
China exports its LDPE mainly to Malaysia and the United Arab Emirates.

Table 1  China’s apparent consumption & export volume of LDPE, 2013-2015 (kt)

Year    2013    2014    2015
Export volume    46.6    49.2    59.5
Apparent consumption    4317.1    3996.9    4913.0



Market price

LDPE prices in China were quite flat in the first half of 2016 but increased drastically in the second half of 2016. Take North China for instance. The price range of LDPE in 2016 was RMB9 150-12 800/t, with an average price of RMB10 195/t. The range in 2015 was RMB9 300-11 900/t, with an average of RMB10 313/t. The overall price level in 2016 was 1.14% lower than in 2015 because of new LDPE capacity put on stream by Shenhua Shenmu and Shenhua Xinjiang. However, LDPE prices increased drastically after October 2016, mainly because of the overhaul of many LDPE units by Yanshan Petrochemical Co., Ltd., Lanzhou Petrochemical Co., Ltd. and other firms during August-September. Also, overhauls of foreign units reduced the import volume. Moreover, the third quarter is the brisk season for the demand of greenhouse films, driving LDPE demand higher and, with the short supply in 2016, motivating drastic price increases.
Pressure from supply increases in the polyolefin market in the future will be much greater than today. Some pressure will come from new domestic capacity, and some will come from overseas markets. The increase of China’s LDPE supply will mainly be from the completion of coal-to-olefin units. China’s LDPE self-sufficiency will reach around 78% in 2020. While the market gap will gradually narrow, most high-end special materials will still be imported.