Note that the 77% operating rate in Scenarios 1 and 2 for 2022 is what was suggested by our estimate of January-August production (this would be the lowest annual operating rate since 2000, reflecting the weak state of the market). The 82% rate in Scenario 3 is the forecast in the ICIS Supply & Demand Database.

Imports, which, are far more important than exports, have declined in most September-December periods since 2010 compared with the prior four months.

So was the case last week in China when polyethylene (PE) import prices in general, including high-density PE (HDPE) injection grade, increased. In the case of HDPE injection grade, prices rose by $10/tonne.

The Polyplastics Group, a global supplier of engineering thermoplastics, has introduced an approach for using less heat-resistant plastics for battery electric vehicle (BEV) cooling components. Polyplastics sees strong potential for plastics such as polyacetal (POM) and polypropylene (PP) for the production of EV cooling components.

In other words, we can conclude that there has been no real improvement in demand, especially when we also include the context of the still record-low HDPE injection grade spread in 2022 over naphtha feedstock costs.

But the latest data on China HDPE demand for all the grades suggests a slight improvement. Annualised January-July China Customs net imports and ICIS production estimates suggested 2022 demand would decline by 4%. But the January-August data indicated only a 3% decline (Scenario 2 in the chart below). As usual, I’ve provided two other scenarios.

The $206/tonne is a minor improvement on the January-August 2022 spread of $200/tonne. But the previous lowest annual spread was $288/tonne in 2002. The average annual spread in 1990-2021 was $496/tonne.

But as the chart above tells us, which features HDPE injection grade, the 1 January-23 September 2022 spread between China prices and CFR Japan naphtha costs was just $206/tonne, the lowest annual spread since our assessments began way back in 1990.

BEVs do not have engines as heat sources and, therefore, require an LLC temperature of 100°C or lower to cool the battery. This allows for the use of less heat-resistant materials for BEV-specific components.

Patterns are similar in other grades of HDPE and the grades of linear-low density (LLDPE). Spreads have never been this low in China before. Low-density PE (LDPE) spreads, after being kept comparatively high by tight supply, are also now heading down. Our northeast Asia PE margin assessments are at record lows.

The further moderate good news is that the January-August data indicated this year’s net imports would fall to around 5.6m tonnes (Scenario 2 in the chart below). The January-July numbers pointed to a decline to 5.5m tonnes. The chart below again provides two other scenarios for net imports in 2022, along with the context of what happened last year.

As the automotive industry moves from traditional ICE vehicles to BEVs, OEMs and part manufacturers are re-imagining the types of materials that can meet the new thermal management needs. Polyplastics believes that less-heat-resistant plastics like POM and PP have significant potential in the manufacture of EV cooling components.

Next year is also not looking good. Sorry to say, but I cannot see any reasons why China’s chemicals markets in general will pick up in 2023. As always, I hope I am wrong.

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Stephen has been with PlasticsToday and its preceding publications Modern Plastics and Injection Molding since 1992, throughout this time based in the Asia Pacific region, including stints in Japan, Australia, and his current location Singapore. His current beat focuses on automotive. Stephen is an avid folding bicycle rider, often taking his bike on overseas business trips, and is a proud dachshund owner.

Japan’s Polyplastics says POM and PP can replace the likes of higher-cost PPS, which is typically used to channel coolant in internal combustion engines.

The August pick-up in imports seems likely to be connected to stronger seasonal demand, including stocking up ahead of the Golden Week holidays. The fall in exports is probably connected to the narrowing of arbitrage as overseas prices fall closer to those in China.

When the temperature of an LLC is 100°C or lower, general-purpose engineering plastics like POM or PP can be used instead of metals or high-performance engineering plastics. In the case of PP, Polyplastics sees potential for PP-LGF (long glass fiber) instead of short glass fiber to increase strength, dimensional accuracy, and overall performance. It also offers Duracon bG-POM made with biomass as an eco-friendly option.

THE LONG-TERM context is everything when chemicals and polymer prices increase in any given week, as the immediate theories attached behind price rises do not usually tell us a great deal.

Let’s parse the data a little further. In every year since 2010, China HDPE imports have increased in August over July. In 2022, August imports totalled 552,864 tonnes versus 447,370 tonnes in July. Exports in August also fell to 21,101 tonnes from 36,646 tonnes in July.

Internal combustion engine (ICE) automobiles use a long-life coolant (LLC) that is primarily made of ethylene glycol. The coolant in engines is typically maintained at a temperature of 70° to 100°C but can rise to 120°C or higher if the engine overheats. Therefore, metals or high-heat-resistant plastics like polyphenylene sulfide (PPS) are used in the cooling components and lines.

If you add higher imports to lower exports in August versus July, this explains the improvement in the full-year 2022 outlooks detailed in the above charts.

Replacing highly heat-resistant plastics such as PPS with POM and PP not only reduces material costs but also helps reduce the carbon footprint of materials and energy consumption during molding.

Theories given for price rises across a broad range of PE grades were that China’s markets had finally bottomed out and/or stocking-up was taking place ahead of the Golden Week holidays, which take place between 1 and 7 October.