BLOG: Big HDPE exporters see another $700m of estimated China sales losses in one month

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson.

NINE OUT OF CHINA’S top 10 high density polyethylene (HDPE) import partners saw their sales to China fall by an estimated total of $1.8bn in January-July 2023 versus the same period last year. Meanwhile, the remaining member of the top 10, the US, saw its sales increase by $232m.

These losses were $700m higher than in January-June 2023 versus January-June 2022. The US also saw its sales gains fall by $140m

Meanwhile, China’s HDPE demand in 2023 is in line to fall by 2% versus last year. This would leave the market some 1.2m tonnes smaller than had been widely expected.

Net imports continue to decline as self-sufficiency increases. This year’s net imports look set to be at around 4.3m tonnes versus 5.6m tonnes in 2022 and an all-time peak of 9m tonnes in 2020.

During the previous 30 years, we knew how every downturn in China’s economy would end: With a big dose of economic stimulus that would bring growth roaring back.

But we know this cannot happen now because of the debt and demographic challenges. What we don’t know is how hard China’s economic landing will be.

“Small businesses and workers who thrived on the decades-long property boom are no longer getting paid,” wrote the New York Times in this 28 August article.

“As a group, suppliers are waiting on at least $390bn in payments, according to the research firm Gavekal Research. And that’s a conservative estimate; the number is probably larger,” the newspaper added.

We need to worry about other unintended consequences such as heavily indebted provincial governments – responsible for some 70% of total government spending – being unable to spend.

We should also consider the effects on consumer confidence of the end of the real-estate bubble and record-high youth unemployment.

But whereas nobody knows where this will end, making it impossible to call what will be the bottom of the global HDPE market, this much has been true since 2011: China’s “economic growth miracle” was always going to come to an end.

HDPE and other chemicals and polymers companies could and should have had plans in place for this happening.

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.