The US trade war with China, US sanctions against Iran and ongoing economic uncertainty are all impacting global petrochemical and plastics markets. Shifting trade flows in 2018 have been most visible in the polyethylene markets, where increased US production of upstream ethylene has led to an increase in US PE export offers.
S&P Global Platts petrochemicals editor, Luke Milner, reports on these changing trade flows and other developments in the petrochemical markets in 2018.
Welcome to The Snapshot – our series which examines the forces shaping and driving global commodities markets today.
Stagnant polymers demand in the Turkish market, driven by wider economic uncertainty and the ongoing weakness of the Turkish lira against the US dollar, is driving uncertainty in neighboring markets.
Bearish sentiment has grown in the Turkish polymers markets across the course of the year.
The increasingly negative sentiment has broadly matched the declining value of the Turkish lira against the US dollar.
Turkey is a major market for exporters of polymers, that are now having to consider alternative destinations for material.
The absence of demand in the Turkish market is just one factor generating serious concerns over trade flows. The impact of US sanctions on Iran and, even more critically, the impact of the ongoing tariff war between the US and China, are driving uncertainty in petrochemical and plastics markets globally.
Market participants active in the African polyethylene markets have already noted a rising tide of US PE offers, placing increasing downwards pressure on spot prices, as availability surpasses demand.
Meanwhile, in Europe, higher volumes of LDPE and HDPE have begun flowing across the Atlantic according to the EU statistics agency Eurostat. Some offers for US origin LLDPE have been heard in Europe at prices below feedstock ethylene.
An increase in PE offers from the US had been expected for 2018, amid an increase in US production and expanded ethylene capacity.
In aromatics, lower prices in Europe in recent weeks have seen arbitrage windows to various parts of the world creak open. Styrene volumes have made the voyage to Asia, while toluene volumes have been US-bound.
The European styrene market appears to be driven by the antidumping duties (ADDs) imposed on Chinese styrene imports from selected countries in the second half of this year.
Mixed xylenes cargoes have moved to India and the Middle East in September due to poor demand in Europe.
Meanwhile, benzene market participants have been keeping a close eye on the spread, and on prompt barrels, in the hopes of making it work.
Looking ahead, 2018 may be remembered as a pivotal year for plastics recycling in Europe, following the European Commission's launch of its first ever Europe-wide strategy on plastics on January 16, which spawned a raft of new commitments from industry bodies and end-users, with the aim of increasing both collection and recycling rates.
Our petrochemical team will be attending the 52nd annual European Petrochemical Association meeting in Vienna from October 7 to October 10, so if you're there do call in to see us at our suite in the Marriott Hotel, where we will be discussing all of these topics and more.
Until next time on the Snapshot—we'll be keeping an eye on the markets.