Polyether: The Year 2022 Starts with An Excess Supply
Click:0    DateTime:May.07,2022

Fu Lin, JLC

Prices in 2021 fluctuated down from highs

The polyether market opened high and yet went low in 2021, mainly impacted by the external factors, as well as the bearish demand. The prices fluctuated at highs and then decreased. By the end of 2021, the market dropped to below RMB12 000/ton, as shown in Chart 1. There was a plummet of RMB4 000/ton in December, hitting a year low. The drop was at the heels of polyether capacity expansion and sluggish downstream demand. After New Year’s Day 2022, on the back of very low prices, the approaching Spring Festival, and low downstream inventory, the market prices started to go up and sales pressure somewhat relieved. However, such market boost is only temporary. The supply is still excessive, and the real demand peak season is yet to come.


Will polyether be bullish in 2022?

The pandemic situation has become severe in some areas of China. Real estate enterprises are seriously short of capitals, leaving the whole industry hard to pick up in the first half of the year. So, some polyether grades will be bearish, with the price at the band of RMB10 000-14 000/ton. But with the passage of time, coupled with a moderate relaxation of the property market regulation and control policy, the capital shortage of the real estate sector might be relieved. If the shortage of automotive chips is also solved, the demand for polyether is likely to increase, and hence the prices. Such favorable factors might appear in the second half of the year. From a short-term perspective, the supply and demand are still imbalanced, and the prices will remain at lows.

The new year starts with an excess supply

With the expansion of the industry, the localization of the product increases gradually, and the domestic market competition becomes fiercer and fiercer. By the end of 2021, China’s polyether capacity has been over 6.3 million t/a. The government has been encouraging exports to digest the excess, and the export largely increased during Covid-19, with the number in first half of 2021 higher than that of the whole year of 2020. However, new capacities keep emerging. East China takes over 80% of the whole country’s capacity, and rough statistics show the new capacities in 2022 will reach 3 million t/a. Wanhua Chemical is the biggest producer, and most of its capacities are located in coastal areas of East China, as shown in Table 1. Due to the oversupply, Covid-19 situation and other factors, a robust market is yet to be seen. Hence, it will be difficult for the market in the first half of 2022, and the exports might be less than 2021. The market might be able to pick in the peak season of second half of the year, with the prices still lower than those of 2021. 


Downstream market influences polyether

As a raw material, polyether is widely applied to sectors like refrigeration and freezing equipment, upholstered furniture, pipe insulation, automotive interiors, sealants, plastic runways and other industries. Its many grades include soft foam, rigid form, high resilience, elastomer, grafted polyether, etc.Along with the rapid development of China’s economy, the consumption of polyether has been increasing. However, the Covid-19 impacted this industry. The automobile production and sales in December 2021 were 2.907 million and 2.786 million. The shortage of chips started in Q3, and the sales then rebounded in Q4. It is anticipated that the automobile sales will continue to improve in 2022. Meanwhile, in November 2021, the sales of household refrigerator dropped by 10.3% YoY to 8.085 million. The weak demand and traditional off-season left the refrigerator industry bearish. The real estate sector is no exception. The state policies push the soft landing of the industry. In Q1 2022, the new construction area might be smaller than the same period of 2021. The pressure persists in the first half of 2022 due to real estate supply and demand reduction.

In summary, under the influence of the bigger environment, polyether industry will face both opportunities and challenges in 2022.The downstream industries are facing hardship in development, and the Winter Olympic was far from being able to substantially support the market for a long term. The war between Russia and Ukraine might support raw materials, but weak demand and Covid-19 still dampen China’s polyester industry. It might be improved in the second half of the year after the downstream rebounds, but it is still difficult to return to the level of 2021.