Takeaway from IHS Presentation on PP Outlook
10. November 2015
Imports overtake exports for North America by 2016! Just one of the comments of a session on the shape and outlook of the global PP market given at the recently-held Global Plastics Summit (GPS2015), co-hosted by IHS Chemical and SPI. Entitled “Global PP—Asian Producers Poised to Struggle While North American Producers Embark on a Golden Age of Profitability,” it was presented by Joel Morales, IHS’s director of polyolefins.
Let’s start with some of his other comments on the North American market, including the fact that there is now a PP supply disconnect with very tight North American supply and overcapacity in Asia. Morales noted:
• 2015 total sales will be ahead of prior year by at least 5%.
• Prices have declined 32ȼ.lb from Oct. 2014 high of 93.5ȼ/lb
Suppliers have aggressively pushed for margin increases with 14 ȼ/lb through Sept., while aiming for another 6ȼ/lb in the November/December time frame.
• North American suppliers’ profitability accelerates due to tight supply and demand and improved propylene supplies.
• Both imported PP pellets and finished goods increase in the Americas. Until 2019 when new PP capacity comes on stream, we will continue to see imports of PP pellets and finished goods.
• Needed PP imports pose challenges that include: payment terms and long lead times; technical service and quality issues; debagging super sacks (1000kg) and 25kg bags (investment required); multiple material handling that leads to potential contamination issues; and commitment to North American markets vs. opportunistic approach.
• Countries from where these imports are most likely to come?
South Korea & Singapore with free trade & China redirect.
Brazil, India, and Thailand aided by 6.5% duty removal.
• Loaded-up margin PP will be challenged by HDPE, PET and even PS in next five years, says Morales.
Some key points on his global PP takeway, and the changing landscape of this market, include:
• Lack of capacity expansion in South America increases the dependence on imports from outside of North America.
• Large Chinese and Middle East capacity expansion affects global trade and puts downward pressure on regional prices in the short term.
• Europe expected to see competitive pressures from new plant expansions in the Middle East and China.