Global Polyethylene prices may face upward pressure from rising geopolitical tension in the Northeast Asia

Global Polyethylene prices may face upward pressure from rising geopolitical tension in the Northeast Asia

  • 11-Apr-2022 4:23 PM
  • Journalist: Harold Finch

Polyethylene manufacturers across regions have revised their contract offers for the month of April in the expectation of an escalation of military conflict in the Northeast Asian region. North Korea’s first suspected Inter Continental Ballistic Missile Test (ICBM) after a 5-year pause in the last week of March was termed by the US and its allies in the region (Japan and South Korea) as a brazen misadventure violating all security council resolutions.

While the Korean peninsula is up for another prolonged cold peace owing to the United States’ collective defence arrangement with its Far-East Asian allies, the simmering tension in the Sino-Taiwanese relations continues to raise the eyebrows of geopolitical and strategic think tanks worldwide, especially in the aftermath of Russia’s invasion of Ukraine. With China warning the US against approving a missile defence system deal with Taiwan, the conflict in the South China Sea could flare up just as in Eastern Europe.

Polyethylene prices globally have already been shooting for the all-time high values by the first week of April on the back of sharp rises in the prices of C2 across regions. Feedstock Ethylene benchmark price in the Northeast Asian region has seen an increase of 3% during the period 25th February to 17th March of FY22, while those of Europe and Southeast Asia have risen by 32% and 3.6%, respectively. Polymer prices in general in Europe have risen to historic highs by the first week of April, including Polypropylene and Poly Vinyl Chloride (PVC), while the prices of Polyethylene are expected to reach its perpetual highs sooner than later.

While ChemAnalyst forecasted the crude oil prices for the month of April to be range-bound, swinging between the USD 90/b to USD 110/b range, the estimate could very well be revised if there is a further escalation in East Asia. While polyethylene spot prices have seen some respite in the second week of April due to diffused cost pressure from feedstock prices, the cost-push from producers in India, China, and the Middle East could reflect in the spot prices in the second half of April.

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