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Delayed Recovery in Global PE & PP Markets
September 08, 2023

LyondellBasell, a prominent figure in the plastics industry, recently projected that the global markets for polyethylene (PE) and polypropylene (PP) might not witness a significant resurgence until the second half of 2024. This forecast comes amidst the influx of new supplies and declining prices in the Americas observed towards the end of Q2, which is anticipated to extend into Q3.

Ken Lane, the Executive Vice President of Olefins and Polyolefins at LyondellBasell, during the company's Q2 earnings discussion, hinted at a typical market seasonality pattern. He expects a dip in volumes in Q4, a slight improvement in Q1, and a more pronounced recovery by H2 2024.

Despite the current market challenges, Lane identified emerging positive signs in export markets and a stabilization in natural gas liquids feedstock prices from their peak in July. However, the company predicts a decline in Q3 earnings, attributing it to subdued demand and an increase in polyolefins capacity, especially in North America and Asia.

The company's Americas segment reported a 26% surge in Q2 earnings, primarily driven by enhanced PE margins due to elevated US prices and reduced ethane feedstock expenses. In contrast, the demand for durable goods negatively impacted PP margins. The volatile feedstock prices expected in Q3, combined with new capacities in North America and Asia, might squeeze margins, given the lukewarm demand and consumers' conservative purchasing behavior.

LyondellBasell's European, Asian, and International segment noted a 9% rise in Q2 earnings, attributed to decreased cracker feedstock expenses. However, the European markets might face challenges due to consumer apprehension and energy price fluctuations. Additionally, the sluggish economic activity and diminished import demand from China could disrupt the global supply-demand equilibrium.

In the long run, Lane anticipates a cautious approach to capacity expansions by companies, similar to previous downturns. However, a robust demand rebound is on the horizon, with CEO Peter Vanacker referencing significant market recoveries post major economic downturns, such as the 2008-2009 financial crisis and the post-COVID era.

--The Plastic Exchange

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