IHS Markit: Quarantines, oil shock wipe out 2020 PE demand growth
2020-03-21    [Source:chemweek.com]


    The combined shock of COVID-19 quarantines and plunging crude oil prices will cut global polyethylene (PE) demand by about 4 million metric tons this year, essentially wiping out all of the growth that had been forecast. "We have reduced our growth projections from what was a nearly 4% to just about 0.1%," says Nick Vafiadis, vice president/plastics and chemicals at IHS Markit. The effects will differ significantly by region, he adds.

    All of the demand growth originally forecast for Northeast Asia has been destroyed during the initial quarantine period, but about three-quarters of the loss will be offset by restocking and displaced demand for post-consumer recycle (PCR), says Vafiadis. "We've seen demand begin to recover in a pretty significant way," he says. "With incentives to restock at lower prices available to buyers, we see about a million tons of this lost demand recovered. We've also seen demand for recycled material essentially vanish, as prices for prime material have now fallen below $750/metric ton. And this has encouraged prime demand to grow back."

    IHS Markit had forecast a modest demand increase in West Europe, but now the market is expected to shrink. "We're noticing a disproportionate impact in certain high population PE demand countries like Italy, France, and Germany that have been virtually shut down as a result of the quarantine," says Vafiadis.

    PE demand in the US and Canada is now expected to decline almost as much as it had been forecast to grow. Vafiadis notes that although the COVID-19 outbreak is disrupting demand for PE bags used in retail, there has also been a demand surge associated with disposable goods and food. "Some buyers have been telling us that they're looking at a kind of dilemma right now," he adds. "With everything that's going on, they're expecting to see prices decline, so they would typically be minimizing their inventories. But [companies] servicing these segments that are seeing surges are concerned about keeping their plants running at full rate, so they're actually adding to their orders."

    Although a decline in oil drilling will reduce demand into pipe, a surge in e-commerce-related packaging materials will provide some offset, says Vafiadis.


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