INDUSTRY INSIGHTThought Leadership

Asia polymer markets: The road ahead

By Muhamad Fadhil, SVP, Strategy and Business Development, and Matthew Rajendra, Senior Reporter, Petrochemicals, Argus

Global polyolefin markets have been unpredictable since Covid-19. The reliance on the Asian market by Gulf Cooperation Council (GCC) producers in the face of this uncertainty was both a competitive and strategic move. The growth at all cost approach in Asia enabled Middle East producers to capitalize on new markets while navigating unique challenges and risks in the region.

Chart 1: GCC PE export share, total exports at 13.9mn t, Argus Media and GTT

Asia: a steadfast export outlet

Post-Covid, Asia remained a key export destination for GCC polyethylene (PE) and polypropylene (PP) producers.

Despite the bearish landscape, China was still crucial to GCC producers as it was the top export destination for PE in 2023. GCC producers exported a total of 13.9 million tons. Of this, 61% was exported to Asia. South Asia ranked second, absorbing 18% of exports. Southeast Asia (SEA) was third at around 14%, with around 6% and 4% of GCC exports going to Singapore and Vietnam respectively. This reflected a growing reliance on Asian markets – even as supply chain disruptions eased after the pandemic, opening up other export outlets. Asia was no longer just a safety net for Gulf producers like we saw in the pandemic.

Asia once again played a major role in PP, with China taking a back seat as capacity expansions reduced its reliance on imports. GCC producers exported a total of 6.9 million tons in 2023. 43% of GCC exports found their way to Asia. South Asia was the top export region accounting for around 22% of GCC exports. The changing dynamics in PP exports to Asia reflect a shift in opportunities from traditional manufacturing economies to new emerging economies where growth potentials are currently uncapped.

Chart 2: GCC PP export share, total exports at 6.9mn t, Argus Media and GTT

Chart 3: Global LLDPE butene film prices, $/t, Argus Media

Chart 4: Global PP raffia prices, $/t, Argus Media

Chart 5: West-bound freight rates, $/t, Argus Media and Freightos

Asian prices retreat after a volatile post-pandemic

Price trends in Asia were consistent with the rest of the world. LLDPE butene film and PP raffia prices were especially volatile during the pandemic. Russia’s invasion of Ukraine saw global feedstock prices rise, supporting PE and PP prices in Asia and the rest of the world. Inflation and high interest rates continue to be a concern in emerging Asian markets, with bread-and-butter issues curbing consumer expenditure.

Tensions on the Red Sea this year have been especially challenging for GCC producers looking to export to the western hemisphere. But exports to Asia remain mostly unaffected, with demand remaining stable in Asia Pacific. This will allow GCC producers to continue unlocking latent opportunities despite supply chain challenges.

Asian demand growth outlook

Demand in Asia is set to rise and be mostly on par with Gross Domestic Product (GDP) projections. Regional GDP projections for northeast Asia (NEA), SEA and south Asia are higher than the global average until 2032, according to forecasts from Argus Media and Oxford Economics.

With the China announcing new stimuli for the real estate sector, the polyolefin market expects Chinese polymer consumption to improve, especially for downstream construction usage.

Growth prospects for SEA are positive, with forecasts pegging growth at an average of 4pc yearly from 2024 to 2032. The converter industry in SEA is also expanding as China focuses more on raw material petrochemical production and final goods manufacturing gets pushed out to developing economies in the region. Travel is also picking up in southeast Asia with regional airlines boosting strong air traffic and profits of late.

Chart 6: Regional Annual GDP Growth, Argus Media and Oxford Economics

Chart 7: Global PP capacity by region, ‘000t, Argus Media

India, which last year overtook China to become the world’s most populated country, is a bright spot in Asia. The Narendra Modi administration, now in its third term, is investing heavily in infrastructural development with recent key projects focused on improving potable water distribution. This saw demand for HDPE PE100 pipe black grades rise sharply, with GCC producers being the main provider of these grades.

Barriers in Asia for GCC producers

While growth prospects are promising in Asia, GCC producers need to overcome supply-side challenges in the form of new competition. New capacities could lead to regionalization as buyers will prefer to buy close to home.

Major PP capacity additions in China will be the main driver of regionalization in Asia Pacific. China will be dominating new PP capacity additions globally until 2032. As China needs to offload excess volumes, PP exports are increasing in southeast Asia and south Asian countries like Bangladesh and Pakistan – legacy markets for Middle East suppliers. Chinese producers are also creative in shipping with the use of break bulk vessels to ensure exports continue when supply chain disruptions emerge.

GCC producers have managed to retain their market share in Asia by leveraging on their feedstock cost advantage. But Asia remains a price sensitive market. GCC producers are increasing specialty copolymer grade production to value add, with Chinese producers producing homopolymer grades.

The threat of regionalization in PE is not as severe as in PP. China will lead new capacity additions from now until 2033. But its PE self-sufficiency is not as high as that of PP and will likely stay that way as Chinese PE consumption will exceed production until 2028. Regionalization of PE trade should mainly be limited to SEA because of duty-free benefits among ASEAN countries. GCC producers will likely continue to dominate PE markets in Asia.

But they could face challenges in exporting specialty PE grades in south Asia, SEA and NEA as these countries enjoy duty-free benefits for imports from Singapore, a major hub of metallocene LLDPE production.

Chart 8: Global PE capacity by region, ‘000t, Argus Media

Chart 9: Table of key GCC PE and PP investments in Asia, Argus Media

Overcoming barriers through strategic investments

With Asia playing a vital role in the portfolio of key GCC producers, these stakeholders are prioritizing strategic investments through joint ventures (JVs) with key Asian players and asset expansions in Asia. This will allow them to be present in Asia, while mitigating the risk of regionalization in Asia.

Apart from PRefChem, Saudi Aramco also operates S-Oil, a major producer of PP. With its upcoming expansions in Ruwais, Borouge is also actively present in Singapore, its regional HQ, and also in China. With competition set to intensify, Middle East producers are aware of the importance of being close to their Asian customers.

Middle East producers are planning further investments in China with key partnerships. Saudi Arabia’s SABIC and China’s Fujian Energy and Petrochemical group also broke ground at Gulei Petrochemical Industrial Park in Fujian province this year. The complex will have a cracker producing 1.8 million ton/year of ethylene, with downstream units producing PE, PP, ethylene glycol and polycarbonate. Commercial operations are slated to begin in the second half of 2026.

The road ahead

The growth potential in Asia remains promising and cannot be overlooked. GCC producers will need to think more strategically long-term to maintain their market share in Asia and unlock new opportunities in the region. Gulf suppliers need to better manage risks associated with fluctuating regional demand, volatile feedstock costs and supply chain uncertainties. Asia is too massive of a market to ignore and maintaining a strong presence during these uncertain times will help Middle East producers stand out against more aggressive new competition.