Having grappled with the pandemic in 2020 and major supply chain woes in 2021, the petchem industry is this time buckling up for another bumpy ride given rocketing energy hikes. Players across the globe are gripped by ‘very high costs’ and relentless supply limitations on one hand, and growing concerns over a possible demand destruction on the other.
Demand is fading due to hammered margins across the production chain. Prices have no room to come down due to soaring costs. Plus, supplies remain limited because of lower operating rates and persisting shipping problems. As uncertainty reigns, increasingly more players are feeling baffled.
Market experts see no respite ahead in sky-high freight rates from Asia, particularly China. Although they are no longer rising, they are expected to remain elevated for the foreseeable future.
This is the main reason why the polymer industry is not feeling the impact of the long-awaited new capacities of PP and PE in China across the globe, although a large part of them have already come onstream. Even players in South East Asia have been complaining about limited imports due to rising shipping costs, let alone the ones in Europe.
On top of the already strained supply chain, petchem producers in Asia have started to slash their operating rates in order to avoid production with negative margins. Producers in the Middle East and
Europe are also considering following suit, with some already taking action. Some others prefer to shut their plants for maintenance in an attempt to manage supply.
News source: chemorbis.com