US PE starting to flood SEA, Europe upon closed door to China

Dec. 03, 2018

In 2017, around 3.5 million tons of new PE capacity came online with Chevron Phillips and ExxonMobil respectively having 1 million tons and 1.3 million tons of it. Accordingly in 2018, increasingly more US PE cargoes have shown up in export markets mostly at competitive prices. 

New capacities boost PE exports from US

Statistics from International Trade Center also affirm that exports from the US were up by 15% for HDPE and by 32% for LDPE and LLDPE in January-September on a yearly basis. The main export destinations for US PE continued to be South America and China. 

US PE was not destined for China

The excess supply from the new capacities was originally and largely expected to find its way to China, where buying appetite for PE is still estimated to grow albeit at a slower pace. However, the trade war that officially kicked off in June between the US and China appears to have changed the rules of the game. 

Statistics evidently show a drop in US PE exports to China throughout the third quarter. Monthly exports were gradually down by as much as 82% for HDPE and 33% for LLDPE and LDPE in September when compared to the end of the second quarter. 

Are trade routes changing?

As the door to China was closed at the beginning of the summer, US PE exporters started to look for alternative outlets. Particularly after August, increasingly more PE offers from the US started to appear in Europe and Southeast Asia (SEA) at comparatively competitive prices. Data from International Trade Center also confirm that US PE shifted its direction to Europe and Southeast Asia. 

US PE exports to Europe and SEA more than doubled

In 2017, only around 1.5% of more than 2 million tons of HDPE exports of the US was made to SEA and 2.5% to Europe. Likewise, only around 1.9-2% of more than 1.8 million tons of LLDPE and LDPE exports of the US was made to SEA and Europe individually.

In 2018, the picture changed mostly in the third quarter upon the closed door to China. The share of Europe and SEA in US HDPE exports in the first three quarters doubled to form more than 4% of the overall exports separately. The share of these two regions in overall LLDPE exports more than doubled to hit respectively 5.2% and 5.6%.

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