CORONA WILL NOT AFFECT THE PE MARKET

Writer： admin Time：2020-04-17 14:44 Browse：

The global polyethylene (PE) market will reach a positive turning point in 2020, following negative or break-even margins in Asia and Europe, Jim fitlin, CEO of dow chemical, said on the company's fourth-quarter earnings call. In view of the COVID - 19 epidemic that has been closely watched globally recently, fitlin believes that the COVID - 19 epidemic will be quickly and effectively controlled and will not affect the turning point of the PE market. Meanwhile, China's new plastic ban has limited impact on the company.
Most high-cost producers in the industry chain are struggling with break-even or negative cash margins, according to third-party industry reports, as the macroeconomic environment remains weak through the end of 2019. By the end of 2019, naphtha based PE producers in Asia and Europe had negative or break-even profit margins, and some higher-cost producers were considering or implementing capacity cuts or extended planned downtime, as well as delaying capacity expansion projects, fitlin said. For dow chemical, the company's packaging and specialty plastics (P&SP) division reported at the meeting that its operating profit before interest and tax (EBIT) fell 23 percent to $648 million in the fourth quarter of 2019 from a year earlier on an 18 percent drop in sales to $4.84 billion.
Regarding the PE market in 2020, fitlin believes that from the situation in January 2020, the outlook of the PE market is beginning to change. "With the normalization of product inventory levels across some chains, we are seeing early signs of a gradual improvement in support from the lows reached in late 2019, which is a harbinger of an imminent turning point," fitlin said. Although from dow's point of view, it is too early to declare sustainable improvements and it may take some time."
Fitlin said the traditional global ethylene plant shutdown peak of march-june 2020 will see 15 percent of capacity shut down, compared with the usual 8 percent. This will provide opportunities for PE pricing and margin expansion. In addition, the first phase of the u.s.-china trade deal should be positive for business sentiment, but it may take time to translate into improved fundamentals, and most tariffs remain.
In the first quarter of 2020, dow expects PE price increases to take hold. Howard unglade, dow's chief financial officer, said: "we expect overall stability in the New Year as some areas begin to recover. With negative PE margins in Asia and Europe, we expect PE prices to rebound from late 2019 lows. If prices remain low, we expect high cost producers to come under severe pressure. In fact, we've seen some of our competitors cut their plant utilization levels in the fourth quarter."
Regarding the covid-19 outbreak in China and the just-issued plastic ban that market participants are extremely concerned about, fitlin believes that although the above events have an impact on the market, they are not enough to change the arrival of the PE market turning point.