VINACHEM

Dow Chemical’s announcement on cutting polyethylene (PE) operating rates is a clear sign of weakening global demand and oversupply of the polymer, along with persistent logistics constraints.

In a 24 August letter to customers, Dow said it was cutting PE operating rates across its asset ase, temporarily lowering global nameplate capacity by 15%.

The blog sees one of the problems for the global industry as demand weakness in China, where the latest data point to, for instance, a 4% decline in LLDPE demand in 2022 over last year.

Record low China CFR linear-low density PE (LLDPE) price spreads over CFR Japan naphtha costs appear to reflect the weak demand outlook. The latest data also suggest China’s LLDPE net imports could fall by 800,000 tonnes this year, following a 1.1m tonne decline in 2021 over 2022.

What happens in China is a big deal globally because last year it accounted for 37% of global LLDPE demand in 2021, up from 15% in 2000. China was also responsible for 50% of global net imports between 2000 and 2021 with Europe in second place at 27%.

Logistics disruptions clearly also remain a big issue for the global PE industry in what are, overall, very challenging market conditions.  - ICIS-