China demand for petrochemicals dwindles with trade war.

Petrotahlil :PROFITS from making petrochemicals in Asia have plunged to their lowest in months as the unrelenting trade conflict between Beijing and Washington stifles Chinese demand for chemicals and plastics just as waves of new production start to come on line.

The global output capacity for polyethylene, a key ingredient for plastics used in everything from piping to toys, is expected to exceed demand by 3 million tonnes by the end of 2020, compared to overcapacity of 545,000 tonnes in 2019, data from commodity consultancy Wood Mackenzie showed.

That comes as new production is set to crank up in China, South Korea and Malaysia, although the United States and the Middle East will account for more than half of the new volumes.

"In the next two years, the operating rates (of polyethylene units) will be impacted as the capacity additions are faster than the demand addition," said US-based Wood Mackenzie principal analyst Ashish Chitalia. Though analysts say polyethylene profit margins are already at their narrowest in around seven years, ballooning supplies could drive them even lower - placing high-cost producers under critical pressure.

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