Global petrochemicals trade could decline by 15% due to the U.S. tariffs upending destination flows, executives from the industry told Reuters on the sidelines of the APPEC conference in Singapore.
“If tariffs remain in place, petrochemicals trading will see another 15% drop on top of the 34% drop it has seen in the last five years,” Ganesh Gopalakrishnan, global head of petrochemical trading at supermajor TotalEnergies, told Reuters.
The overcapacity that has been building in the industry has led to large trading declines in recent years, according to the executive.
As China isn’t selling its huge production volumes in the U.S., Chinese petrochemicals exporters are expanding supply into other Asian countries, shifting the global trade flows.
“Our main market is South Asia, Thailand, Indonesia, Malaysia, Vietnam,” Bahrin Asmawi, chief commercial officer of Petronas Chemicals Group of Malaysia, told Reuters.
“And all these are being supplied, being attacked by China because they cannot supply into the U.S.”
China’s petrochemicals expansion has created a surplus on the market in the past year, reducing global margins.
China’s government is already taking steps towards eliminating excess petrochemical capacity.
But the tariff war that U.S. President Donald Trump has waged on the world is going to prompt more efforts in this respect, including a potential change in feedstock import flows, seeing as China has been highly dependent on the United States for its propane and ethane supply. This made these two a target in the insane-tariff spat between Washington and Beijing this spring that saw the two economies try to out-tariff each other on certain key goods and raw materials.
Due to excess capacity, China, South Korea, and other Asian petrochemical producers have faced free-falling margins in recent months, with many companies struggling to break even.
South Korea last month urged its struggling petrochemicals sector to slash excess capacity and restructure operations amid a global glut that has depressed petrochemicals margins and threatened the industry in many Asian and European countries.
By Tsvetana Paraskova for Oilprice.com
