The energy crisis in China is beginning to have a direct and significant impact on certain sectors of the global industry. The suspension of the work of the largest petrochemical enterprises in the PRC amid a power shortage has already led to an increase in prices for basic polymers by 10%. The deficit is exacerbated by higher commodity prices. These factors, according to experts, will lead to a further increase in the cost of polymers by the end of the year, returning the price level to spring peaks. or a significant reduction in the production of large-scale chemicals. At the end of September, almost two-thirds of Chinese provinces are experiencing problems with energy supply both in the industrial sector and at the household level, the CEP of Gazprombank reported (for more details on the energy crisis, see the article “ Gas entered uncharted territory “). According to Kommersant in the trading division of SIBUR in China, in September production losses of local polypropylene plants amounted to more than 287 thousand tons, and polyethylene – about 235 thousand tons. SIBUR also notes that restrictions on the supply of electricity have also strongly affected demand from end consumers. weeks. According to Bloomberg quotes, polyethylene based on CFR Far East and FD Western Europe cost $ 1.2-1.5 thousand per ton by the end of September, that is, the growth was about 10%.
While such levels are below the peak values of spring, when the price of polyethylene in Europe reached $ 2 thousand per ton, but, according to market participants, the situation may repeat itself, since the situation with energy supply in China will only get worse as it enters the heating season.
Control over energy consumption and high prices for coal and methanol will support continued growth in prices for polypropylene and polyethylene in China in October, SIBUR said. They explain that restrictions on electricity in Guangzhou, Jiangsu and Zhejiang provinces will cause delays in the fulfillment of export obligations and may affect price dynamics in other regions.
Experts also believe that price increases are inevitable … Nina Adamova from the CEP of Gazprombank explains that, on the one hand, during 2021 there has been a significant increase in demand for chemical products both in China and outside the country. China’s National Bureau of Statistics reports that, amid economic growth, the profit of the Chinese chemical industry grew by 145% in January-August 2021. On the other hand, the situation is aggravated by the fact that the Chinese industry still has a high share of coal not only as an energy source (about 50% of the country’s energy supply), but also as a raw material for industrial chemistry – polypropylene, aromatic hydrocarbons, – for example, 20–25 % of polypropylene in China is produced from coal. A polypropylene plant in Shaanxi province was forced to suspend production due to coal shortages and energy consumption constraints. Platts estimates that it accounts for 20-25% of China’s polypropylene production. There is no reason to believe that this case is an isolated one and the situation will be resolved in a few weeks, Mrs. Adamova notes. At the same time, the expert continues, the current narrowing of the “commodity-raw material” price spread leads to a reduction in the supply of petrochemical products of enterprises in China and Europe, whose business becomes unprofitable in such conditions. As a result, we can expect a significant jump in prices for oil and gas chemistry on the world and Russian markets in the fourth quarter of 2021.
Vice President for Global Business Development of Argus Mohamed Fadil agrees with Mrs. Adamova. In his opinion, a serious energy crisis in China and a sudden supply disruption in the main production provinces will put strong upward pressure on prices for petrochemical and polymer products. The situation was already reflected in the forward and spot markets in early October ahead of the Chinese Golden Week (October 1-7). Fadil notes that polymer prices in China have been the lowest in the world for most of this year. With this in mind, at the beginning of the year, Chinese companies switched to active export of polypropylene to Southeast and South Asia. But power outages could slow China’s polypropylene and polyethylene exports in the short term, as manufacturers reorient supplies to meet local consumer demand, the expert said. If this happens, then the Middle East and Russian polymer producers will be able to fill the deficit in supplies to Asia by redirecting them from the European and Turkish markets.
Olga Mordyushenko
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