Demand from packaging and healthcare segments to help polyolefins market stay afloat amid Covid-19

GlobalData Energy 29 October 2020 (Last Updated October 29th, 2020 13:51)

Demand from packaging and healthcare segments to help polyolefins market stay afloat amid Covid-19

The Covid-19 pandemic continues to have a significant impact on the global economy, affecting the growth of the global polyolefins market, which is expected to decline in 2020. Weaker end-market demand from construction, automotive, and industrial applications among others also added to the current crisis of the market. However, the pandemic-driven feeble demand is partially offset by strong and increased demand from sectors such as packaging, FMCG, and healthcare. And with the gradual appreciation of economic activity, the demand for polyethene and polypropylene is likely to improve towards the end of 2020 and expected to maintain the upward momentum from 2021.

The economic impact caused by the pandemic has led to disruption in terms of workforce availability, supply chain, and capacity expansion of projects. Borealis, a partner with KLPE in Atyrau, Kazakhstan, has withdrawn from the polyethene project due to Covid-19. Also, Pembina postponed its PDH/PP project in Alberta as part of CapEx reduction. Companies have put in place measures to undertake reduction or deferral of certain capital expenditures, mainly due to increased volatility in global markets, concerning the outbreak.

Polyolefin capacity additions are largely concentrated in Asia, primarily China and India that target self-sufficiency to meet the existing and growing demand in their respective countries. Other majors such as Russia, Iran and the US also had a significant capacity addition.

The pandemic has impacted the demand for polyethene and polypropylene in the shorter term. Consequently, polyolefin producers have either lowered operating rates, halted operations, or declared force majeure to withstand the challenging economic conditions. Petrochemical companies are closely monitoring economic developments and would undertake a strategic review of the progress and development of key projects.