Polyethylene Market Supply and Demand Analysis: Rising Supply Pressure in Q1 2025
Introduction
With Donald Trump’s re-election as President of the United States, the outlook for China's polyethylene (PE) import market has sparked notable concerns. These concerns primarily stem from the escalation of U.S.-China trade tensions during Trump’s previous term, which significantly impacted tariffs on chemical and plastic products and caused supply chain adjustments.
Impact of Trade Disputes
Trump's trade policies could further strain U.S.-China trade relations. Proposals such as a 10% comprehensive tariff on nearly all U.S. imports, a 60% uniform tariff on Chinese goods, and other targeted duties could be detrimental. If implemented, these measures may harm U.S. consumers and businesses, suppress the economy, and threaten jobs. For China, these policies could lead to a significant decline in export volumes to the U.S.
Capacity Growth and Import Market
Despite trade disputes, China's polyethylene capacity continues to grow. During 2023-2024, China's net PE imports rebounded compared to 2022. By October 2024, China had imported approximately 12 million tons of PE, with total imports for the year expected to surpass 2023 levels. This trend is partly attributed to delays in the commissioning of new domestic capacities. China's PE production capacity in 2024 is estimated at 31.8 million tons, representing a modest 2% year-on-year increase.
Looking ahead to 2025, China is expected to see a surge in new PE production capacity, with growth anticipated to exceed 19%. Producers are focusing on specialty markets, including metallocene polyethylene (mPE), polyolefin elastomers (POE), and ultra-high molecular weight polyethylene (UHMWPE). This will likely further enhance China's self-sufficiency in PE and intensify competition in the import market.
Influence of U.S. Supply
The United States remains one of China's key sources of PE imports, accounting for about 18% of total imports between January and October 2024. Although China's overall PE imports are declining, the U.S. share has increased due to its growing production capacity and cost advantage from ethane-based feedstocks.
The U.S. occupies a highly competitive position on the global PE cost curve. By 2025, U.S. PE production capacity is expected to approach 25.5 million tons, with a compound annual growth rate (CAGR) of 4.8% from 2018 to 2025. This makes the U.S. a major global PE exporter, further expanding its market share in China.
Conclusion
In Q1 2025, as newly commissioned facilities ramp up production and previously idled plants resume operations, PE supply pressure is expected to rise, resulting in a looser supply-demand balance and downward pressure on spot prices. Supply-demand conflicts are likely to peak in January, leading to production profit compression. In February and March, temporary plant shutdowns are expected to increase, providing some relief to supply pressure. However, the overall market will remain in a state of oversupply.
(Content and images sourced from the internet.)