Global petrochemical outlook H1 2020

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The key 2019 themes of burgeoning production capacity and US-China trade tensions echoing across global petrochemicals market will persist into the first-half of 2020, tilting the supply/demand balance and shifting trade flow patterns.

New Chinese refinery capacity that came online during 2019 set a bearish tone for aromatics prices, squeezing margins across the board from mixed xylenes and down the chain to styrene monomer.

Olefins markets like ethylene and propylene in the US, and butadiene in Asia, will also see a boost in supply due to capacity additions. A 1 million mt/year export terminal in the US will also lead to an increased supply flow of cheap ethylene from the country to the rest of the world during 2020.

US-China trade tensions added volatility in global petrochemical markets in 2019, and as the year comes to an end, the effects of the ongoing issue have now become visible across downstream petrochemical markets, such as that for plasticizer and polyester, which are seeing faltering prices and compressed margins.

Trade tensions and additional capacities have also redrawn trade flows between some geographies in 2019, a trend that is set to continue in 2020.

Some downstream capacity may move to countries in South Asia or elsewhere to avoid the tariffs resulting from the US-China trade tensions, however, that is a very gradual process.

Another development in 2019, expected to continue into 2020, is the diversion of aromatics feedstocks like mixed xylenes, benzene and toluene into the gasoline blending pool due to cost economics and squeezed margins across the aromatics chain.

Meanwhile, the International Maritime Organization’s implementation of lower sulfur content for marine fuels from January 2020, should trigger a rise in chemical tanker freight costs, which will in turn likely cause an upward adjustment of chemicals prices.

Yet another result of environmentally friendly efforts in today’s world is increasing demand for recycled plastics in Europe, despite higher prices and limited supply, as consumer goods firms keep setting bigger targets for the use of recycled material.

Read our special report on plastics recycling