The Strategist

China's energy crisis reveals new implications



10/04/2021 - 07:15



The energy crisis in China is starting to have an immediate and significant impact on certain sectors of the global industry.



Chris
Chris
Suspension of major petrochemical plants in China amid power shortages has already resulted in a 10% increase in the price of key polymers. The deficit is exacerbated by rising raw material prices. These factors, according to experts, will lead to further increases in polymer prices before the end of the year, returning price levels to their spring peaks.

Restrictions on power supply to industrial plants in China as part of an energy efficiency programme resulted in a complete shutdown or a significant reduction in production of large-tonnage chemical products. As of the end of September, almost two-thirds of China's provinces were experiencing power supply problems in both the industrial sector and households.

The decline in supply, the company said, has caused polymer prices to rise by $100-150 a tonne over the past three weeks. According to quotations by Bloomberg, CFR polyethylene on Far East and FD Western Europe bases cost $1.2-1.5 thousand per ton by the end of September, an increase of about 10%.

So far, these levels are lower than in spring, when prices in Europe peaked at $2,000 per tonne, but, according to market participants, the situation may repeat itself, since the situation with energy supply in China will only get worse as we enter the heating season.

Energy controls and high coal and methanol prices will support continued increases in polypropylene and polyethylene prices in China in October, SIBUR said. They explain that electricity restrictions in Guangzhou, Jiangsu and Zhejiang provinces will cause delays in meeting export supply obligations and may affect price dynamics in other regions.

source: bloomberg.com




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