Ho Chi Minh City — Vietnam’s polyethylene prices are expected to weaken in early 2019 as surging resin imports outpace single-digit demand growth, industry sources said on the sidelines of VietnamPlas 2018 in Ho Chi Minh City.
“In the short term, because of the US-China trade war, we forecast that the local polyethylene market price will be on a downward trend because of supply [outpacing] demand,” a source from Mitsubishi Corporation Vietnam said.
Vietnam’s imports of US-origin PE were estimated to have surged to 10,000-20,000 mt/month in August and September as US cargoes were increasingly diverted to Vietnam to avoid China’s newly-imposed tariffs, industry sources said.
This is up from imports of 6,300 mt in July, and from 3,500 mt/month over the first half of 2018, the sources said.
Traders such as Tricon, Vinmar and OPEC Plastics have been heard buying US-origin PE and repacking it for import to Vietnam, but the extent of the “trade war bump” will only be seen only after Vietnam compiles official customs data for the fourth quarter, the sources said.
Saudi Arabia was Vietnam’s main source of PE imports at 62,000 mt/month over H1 2018, up 10,000 mt/month from 2017, customs data showed.
Vietnam’s overall PE demand growth for 2019 is estimated at 7%-10%, according to a survey of major traders in the country.
While some market participants said overall PE growth of up to 15% was possible next year, many sources did not expect general purpose high density polyethylene and linear low density polyethylene demand to grow as strongly as in past years.
“In Vietnam, PE is used [extensively] in shopping bags. For export markets like the EU and US, there has been a push to be more environmentally conscientious, so customers are asking for better quality film and recycled or biodegradable bags,” a Mitsubishi Vietnam trader said.
High density bimodal grades and C6 or C8 Metallocene LLDPE will likely to see strong growth because they can be used to create better quality packaging, while LLDPE and LDPE growth is expected to be tepid in the short term, the trader added.
“Multilayer [film] for packaging and construction PE like pipe grade demand is increasing [quickly] as a segment,” an OPEC plastic manager said, adding that growth may be up to 20% next year in these segments.
Vietnam’s PE end-users see opportunities as supply chains reroute due to the US-China trade war, but are cautious about committing to capacity expansions immediately, preferring instead to wait and see how long the situation lasts, sources said.
It will take time for expansions to occur, and a lag time before resin demand grows accordingly, an OPEC Plastics manager said.
“Walmart is looking to move orders to Vietnam to avoid [US] duties to finished plastic products [from China], but I don’t see a big increase [in resin orders] from my customers supplying Walmart yet,” he said.
Chinese companies tied to the US supply chain with facilities already in place in Vietnam will be the first to expand in Vietnam, given the immediacy of their exposure to US tariffs, he said.
The biggest growth in PE demand in Vietnam next year should come from this segment, not domestic Vietnamese companies, he added.
— Huang Yi-Jeng, [email protected]
— Heng Hui, [email protected]
— Edited by Wendy Wells, [email protected]
Source: S&P Global Platts
