BLOG: The China story is consistent even in higher-value polycarbonate

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson: If this wasn’t so critically important, I’d be getting bored by now in telling the same old story. As today’s blog confirms it is the same story in the engineering or higher-value polymer polycarbonate (PC), as it is many other in chemicals and polymers.

In 1992, China, with a 22% share of the global population accounted for 3% of global demand. By the end of this year, we expect China to be responsible for 47% of global demand from an 18% share of the global population.

Here we go again: Events in China (demographics, debts, its geopolitical relationship with the West and the rise in China’s chemicals and polymers capacity) mean that today’s chemicals world is very different from the past.

Are you still not convinced? Then consider these ICIS PC data points:

• During the1992-2021 Chemicals Supercycle, China’s demand growth averaged 17% per in year. In 2022-2030 we are forecasting this will drop to 3%.
• In 1992-2023, China accounted for 76% of global net imports of PC among the regions and countries that imported more than they exported. China’s percentage shares of global net imports have been falling since 2021, the year of the Evergrande Moment.
• The ICIS base case predicts China’s net PC imports will average just 460,000 tonnes a year in 2024-2030 compared with 1.1 million tonnes during the peak years of 2010-2023.

But 460,000 tonnes assume an operating rate of just 47% compared with the long-term average of 68%. Raise operating rates closer to 68% and you end up with China as a net exporter.

There is, however, a scenario where China struggles to directly export chemicals and polymers where it is not already an established player. This could apply to PC.

In 2023, 83% of Taiwan’s PC production, 41% of Thailand’s production, 34% of South Korea’s production and 26% of Japan’s production was dependent on exports to China. A valid question therefore seems to be: What should these countries do next?

What would it take to return to the very healthy average global PC operating rate of 83% in1992-2023?

Assuming no change to our base case assumption on production (the same as demand), global capacity would have to fall by an average 138,000 tonnes per year versus our forecast that capacity will instead grow by 153,000 tonnes each year.

What might be the answer for producers in countries such as South Korea? Becoming more differentiated than their Chinese competitors as they emerge as winners in the fourth industrial revolution: Sustainability.

Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.