Prepared exclusively for the Flexible Packaging Association (FPA) by IHS Markit, the report is based mainly on key aspects of the polyolefin industry such as olefin feedstocks; PE and PP markets; pricing trends; and related energy and economic issues. Polyethylene resin and polypropylene resin is the focus of the report, and covers High Density Polyethylene (HDPE); Low Density Polyethylene (LDPE); Linear Low Density Polyethylene (LLDPE); and Polypropylene (PP).

From 2017 to 2020, the world economy is likely to see strong back-to-back growth rates. However, the risks related to the growth have also risen dramatically in recent months. The biggest concern is that the imposition of steel and aluminum tariffs by the United States may be the beginning of a more extended trade war, which could derail global recovery. If further U.S. tariffs, and any retaliation are limited (the most likely scenario), then the impact on global growth will be minimal.

Global economic growth is expected to increase to 3.4% real GDP growth in 2018, its fastest pace since 2010. The U.S. economy will benefit from an improving tax and regulatory climate and strengthening business investment. Eurozone growth will remain steady, holding above 2% through 2018, but UK growth is expected to slow as Brexit-related uncertainty delays investment. China’s growth will slow as policy initiatives address excesses in industrial capacity, debt, housing inventory, and shadow banking. Asia’s other emerging markets will sustain robust growth. Russia and Brazil will continue to recover from the 2015–16 recessions. For the long term, the global GDP growth rate will hover at approximately 3% year over year.

PE Overview

Overall, the PE outlook is positive. Global demand growth is at 4.7%, the best since the 2010 recession rebound, with an anticipated 4.9% growth in 2018. There is demand strength across multiple regions, but China is driving the demand. In 2017, global PE demand exceeded 100 million tons, and new capacity start-up and ramp-up delays are expected to bolster global margins. HDPE resins have seen particular price strength and PE price increases totaling 7 cents/lb. are pending in the U.S. market. The anticipated downturn has been delayed and minimized.

PP Overview

The global polypropylene supply/demand balance is expected to be tighter in the coming years. China’s self-sufficiency in PP production is expected to reach close to 90% by 2019, and China’s import ban on plastics scrap will support virgin PP resin demand. In North America, the pace of PP debottlenecking accelerated in the past two years, but imports are still a significant factor in the supply chain. China’s arbitrage with the Americas will set prices for commodity PP resins in North America. PP producers’ margin implementations seem likely without destroying demand.

For More Information

The report is only available to FPA members, and can be downloaded by visiting the FPA website, www.flexpack.org and scrolling to the “Publications and Reports” section on the homepage. For more information, contact FPA at fpa@flexpack.org or 410-694-0800.