S&P Global Platts reports that in 2H 2017 Central and Southeast Asia are going to put on-stream new polyethylene production lines with a total capacity of 2 mtpa that will account for around 30% of the global supply increase. On top of that, new US production capacities will focus on Asia due to the weak domestic demand, boosting the supply by 3 mt by the end of this year. Although Platts expects start-up challenges to preclude the new lines fr om operating at full capacity during the first year, their launch will definitely affect the market in the long run.

According to ICIS, Asia’s polyethylene prices in 2016 were stable. However, this autumn’s “OPEC-plus” agreement to freeze oil production caused a hike in feedstock prices, raising serious concerns among polyethylene producers. They were unable to fully pass on higher prices to consumers due to demand stagnation in key sectors (packaging, consumer goods, construction) amid the anaemic economic growth. And this is wh ere China stepped in by cutting significantly its polyethylene output in light of the long Golden Week (National Day) celebrations. Middle Eastern, Indian and East Asian producers were quick to refocus their supplies.

This serves to highlight China’s significance, and the situation will continue into the foreseeable future. IHS Markit sees a big potential for the country's demand growth: last year's per capita consumption in industrially developed countries neared 40 kg against 18 kg in China. Despite the growing domestic output, the nation is highly dependent on imports. The ICIS forecasts it to consume around 23 mt of polyethylene in 2017, 10 mt of which will be imported.

Despite the growing domestic output, the nation is highly dependent on imports.

Indian suppliers ONGC and Reliance Industries that are launching new capacities are expected to become more active in the Chinese market over the coming years. In addition, there have been new rumours about the intentions of China’s government to consolidate more than ten state oil and gas companies, which will reduce costs, improve manageability, and as a result boost investments in the petrochemical industry. At the same time, India itself offers an attractive growth potential, with an average annual polyethylene consumption of a mere 4 kg per capita. IHS Markit predicts that by 2040 the Indian market will expand to match the Chinese.

These are the developments behind the launch of the many new capacities in the region. Russian companies can, too, get a piece of the Asian pie. August marked the official start of the Amur GPP construction, Gazprom's plant with a design processing capacity of 42 bcm that will use gas transported by the Power of Siberia gas pipeline. SIBUR is considering Amur GPP as a potential feedstock supplier for its new polyethylene production complex, which, if the project kicks off, will come on-stream after 2023. Thanks to its proximity to China, the complex will help strengthen Russia’s foothold in the Asian markets. Here forecasts paint a positive outlook: over the last year, many previously announced Chinese coal-to-olefins projects got suspended or moved to a much later date. This was driven by much stricter environmental requirements. John Richardson, senior Asia consultant with ICIS, does not expect China’s polyethylene self-sufficiency to rise any time soon, forecasting instead a decrease in the next 3–4 years.

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