Viewpoint: US 2021 PE supported by higher global prices
An expected easing of US polyethylene (PE) contract prices in the first half of 2021 will be tempered by ongoing global demand growth, including the shutdown of a major PE source in Mexico.
The market continues to recover from supply shortages caused by hurricanes and other maintenance-related outages in the second half of 2020. But early in December Braskem Idesa's 1.15mn t/yr PE plan in Coatzacoalcos, Mexico, was shut down due to lack of natural gas supply, a move that will delay significant price declines as the region.
The Braskem Idesa plant shut down on 1 December when Mexico's state-owned pipeline administrator Cenagas cut natural gas supply to the plant due to alleged corruption concerns. With no restart date announced, the shutdown will leave a significant supply gap in the region, which will most easily be filled by US producers. With supply tight and prices rising in Mexico, it will be an attractive and more convenient option for US producers looking to export and will help to support US domestic and export prices.
Even before the Braskem Idesa shutdown, US buyers' hopes for a quick price drop had already begun to fade with the ramp-up in international prices caused by higher global feedstock costs, particularly in the Asia region. As China prices have steadily risen, increasing by as much as 12pc since mid-November, US export prices had already started rising by early December. Export prices are expected to continue to increase heading into the first quarter of 2021, as global demand has shown no signs of the typical seasonal slowdown.
Demand growth driven by packaging
The strong demand has been driven by surging sales related to packaging of all sorts, but predominately food and e-commerce packaging, as pandemic-related shutdowns have led to more grocery and take-away food demand than is typical. In the first 11-months of 2020, total US and Canada PE sales are up by 6.1pc, with exports up by 12.8pc and domestic sales up by 2.2pc versus the same period in 2019, according to preliminary data from the American Chemistry Council's Plastics Industry Producers' Statistics Group as compiled by Vault Consulting.
Total US and Canada PE production is up by 5.9pc through November versus the same period in 2019, as new output from new PE plants has outweighed lost supply caused by extended hurricane-related outages and other maintenance outages. LyondellBasell started its new 550,000t/yr Hyperzone high density polyethylene (HDPE) plant in February 2020, while Sasol and Formosa each started up a new low density polyethylene (LDPE) plants with 420,000t/yr and 400,000t/yr, respectively, in November 2020.
As those new plants ramp up to higher operating rates in 2021, and more than 3.8mn t/yr of new PE capacity is set to come online in the Asia Pacific region in the first half of 2021, global PE supplies will lengthen, which should eventually result in a global price decline.
Expected strong demand, continuing in the first half of 2021, will support prices for a while. But pricing is expected to ease more significantly in the second half of 2021 as demand begins to return to pre-pandemic levels, and as companies begin to refocus on sustainability initiatives that had been set aside during the pandemic period.
Related news posts
Singapore's MPA, IEA unite on maritime decarbonisation
Singapore's MPA, IEA unite on maritime decarbonisation
Singapore, 17 April (Argus) — The Maritime and Port Authority of Singapore (MPA) and the IEA have signed an initial deal to push the transition to zero and near zero emission fuels, while working on technology as well as digitalisation to meet the maritime decarbonisation agenda. The agreement, signed by MPA chief executive Teo Eng Dih and IEA executive director Faith Birol, was announced at the Singapore Maritime Week 2024 (SMW) this week. "Greater international collaboration in maritime and energy industries is critical for international shipping to meet international decarbonisation goals," Teo said. "Shipping is one of the hardest sectors to decarbonise and we need to spur development and deployment of new technologies to slow and then reverse the rise in its emissions," said IEA chief economist Tim Gould. "This will require strong collaboration at a national and international level." Training programmes will be built to support the adoption of new fuels. There will also be partnerships made towards fuel-related projects and initiatives such as the International Maritime Organisation-Singapore NextGen project. The IEA plans to open its first regional co-operation centre in Singapore, which will be its first regional office outside of its headquarters in Paris, France. By Mahua Chakravarty Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Japan’s Idemitsu builds stake in refiner Fuji Oil
Japan’s Idemitsu builds stake in refiner Fuji Oil
Tokyo, 17 April (Argus) — Idemitsu has agreed to buy an additional stake in fellow Japanese refiner Fuji Oil from domestic power producer Jera, adding to their existing partnership. Idemitsu on 16 April said it will buy Jera's entire 8.75pc share of Fuji, raising its stake to 21.79pc, for ¥2.5bn ($16.2mn). It is unclear when the companies will complete the deal. Jera declined to disclose the reasons for selling its stake. Idemitsu in March also bought domestic petrochemical producer Sumitomo Chemical's stake in Fuji to boost its share to 13.04pc from 6.58pc, becoming its main shareholder. It aims to further optimise fuel oil production and sales including refinery operations, while promoting decarbonisaton of its businesses. Idemitsu is enhancing its partnership with Fuji in the face of shrinking domestic oil and petrochemical demand and growing consumption in overseas, especially in southeast Asia. Idemitsu owns the 190,000 b/d Chiba refinery in the Keiyo industrial complex in east Japan's Chiba prefecture where Fuji operates the 143,000 b/d Sodegaura refinery. Their refineries are connected to Sumitomo Chemical's Chiba plant. Idemitsu's refineries also include the 150,000 b/d Hokkaido in the northernmost prefecture of Hokkaido, the 160,000 b/d Aichi in Aichi prefecture in central Japan and the 255,000 b/d Yokkaichi in Mie prefecture in the country's west. Idemitsu's subsidiary Toa Oil operates the 70,000 b/d Kawasaki refinery in east Japan's Kanagawa prefecture. By Nanami Oki Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US Gulf lowest-cost green ammonia in 2030: Report
US Gulf lowest-cost green ammonia in 2030: Report
New York, 16 April (Argus) — The US Gulf coast will likely be the lowest cost source of green ammonia to top global bunkering ports Singapore and Rotterdam by 2030, according to a study by independent non-profits Rocky Mountain Institute and the Global Maritime Forum. Green ammonia in Singapore is projected to be sourced from the US Gulf coast at $1,100/t, Chile at $1,850/t, Australia at $1,940/t, Namibia at $2,050/t and India at $2,090/t very low-sulphur fuel oil equivalent (VLSFOe) in 2030. Singapore is also projected to procure green methanol from the US Gulf coast at $1,330/t, China at $1,640/t, Australia at $2,610/t and Egypt at $2,810/t VLSFOe in 2030. The US Gulf coast would be cheaper for both Chinese bio-methanol and Egyptian or Australian e-methanol. But modeling suggests that competition could result in US methanol going to other ports, particularly in Europe, unless the Singaporean port ecosystem moves to proactively secure supply, says the study. In addition to space constraints imposed by its geography, Singapore has relatively poor wind and solar energy sources, which makes local production of green hydrogen-based-fuels expensive, says the study. Singapore locally produced green methanol and green ammonia are projected at $2,910/t and $2,800/t VLSFOe, respectively, in 2030, higher than imports, even when considering the extra transport costs. The study projects that fossil fuels would account for 47mn t VLSFOe, or 95pc of Singapore's marine fuel demand in 2030. The remaining 5pc will be allocated between green ammonia (about 1.89mn t VLSFOe) and green methanol (3.30mn t VLSFOe). Rotterdam to pull from US Gulf Green ammonia in Rotterdam is projected to be sourced from the US Gulf coast at $1,080/t, locally produced at $2,120/t, sourced from Spain at $2,150/t and from Brazil at $2,310/t. Rotterdam is also projected to procure green methanol from China at $1,830/t, Denmark at $2,060/t, locally produce it at $2,180/t and from Finland at $2,190/t VLSFOe, among other countries, but not the US Gulf coast . The study projects that fossil fuels would account for 8.1mn t VLSFOe, or 95pc of Rotterdam's marine fuel demand in 2030. The remaining 5pc will be allocated between green ammonia, at about 326,000t, and green methanol, at about 570,000t VLSFOe. Rotterdam has a good renewable energy potential, according to the study. But Rotterdam is also a significant industrial cluster and several of the industries in the port's hinterland are seeking to use hydrogen for decarbonisation. As such, the port is expected to import most of its green hydrogen-based fuel supply. Though US-produced green fuels are likely to be in high demand, Rotterdam can benefit from EU incentives for hydrogen imports, lower-emission fuel demand created by the EU emissions trading system and FuelEU Maritime. But the EU's draft Renewable Energy Directive could limit the potential for European ports like Rotterdam to import US green fuels. The draft requirements in the Directive disallow fuel from some projects that benefit from renewable electricity incentives, like the renewable energy production tax credit provided by the US's Inflation Reduction Act, after 2028. If these draft requirements are accepted in the final regulation, they could limit the window of opportunity for hydrogen imports from the US to Rotterdam to the period before 2028, says the study. By Stefka Wechsler Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Overseas companies get US FDA polymers certifications
Overseas companies get US FDA polymers certifications
Houston, 15 April (Argus) — European and Asian companies have received a spate of FDA no objection letters (NOL) this year, a growing indication of overseas interest in the US recycled polymers market. FDA no objection letters allow recyclers to sell their recycled plastic pellets for use in limited food and drink-grade applications. Ultra-Poly and Circulus Holdings are the only two US-based companies who have received NOLs so far in 2024, out of a total of 14 different companies. Circulus received approval to use recycled low density polyethylene (LDPE) from its Ardmore, Oklahoma, facility for food contact in January, and Ultra-Poly received approval to use its recycled injection-molded polypropylene for food contact in March. Austrian recycler Borealis received two NOLs this year from the FDA, for its polypropylene and its high-density polyethylene (HDPE), and German recycler Gneuss Kunststofftechnik has received three, for HDPE, polyethylene terephthalate (PET), and polystyrene (PS). Italian chemicals company Versalis received approval for its recycled PS. Recyclers from East and Southeast Asia made up the rest of this year's approvals so far, for PP, PS, and HDPE. Recipients include the Pashupati Group from India, China-based Shanghai SmartLoop Industrial, and the Japan-based DIC Coporation. Growing imports from overseas greatly increased supply of recycled material in 2023 and 2024, but some domestic producers fear that the lower pricing from some overseas manufacturers will threaten their ability to stay in business. By Zach Kluver Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more