Many of the challenges that shaped the chemical industry in 2022 will continue in 2023, including high energy costs in Europe, Russia’s war against Ukraine, and China’s response to COVID-19.
This comes in a somewhat gloomy economic climate, as fears of a global recession continue to grow. The process chain chemicals market faces challenges in early 2023: long supply and short demand. The demand for polymers and fibres is expected to remain weak during the first half of the year, mainly due to high inflation in Europe and the United States. China’s road to recovery is expected to be slow as the country deals with the fallout from relaxing its zero-covid policy. So all signs point to a hard H1 2023 for downstream chemicals. But could a recovery in demand in the second half bring much-needed relief to manufacturers’ margins?
1. Margins under high cost pressure
In commodities volatile or expensive commodities continue to challenge upstream players, with margins still under pressure in the first half of 2023.Polyolefin feedstock supply is good, but excess issues are likely to gnaw through the year. in the year In the polyester value chain, the uncertain market outlook for PTA and MEG—long supply, short demand—results in uncertain prices. Meanwhile, European natural gas prices and the ability to secure competitive gas are expected to be key constraints for the polyamide industry in 2023 (and beyond).
2. Recession fears weigh on package demand.
The consequences of Russia’s war in Ukraine are acutely felt, especially in Europe, where users usually buy gas locally. Consumers are cutting back on spending as recession fears grow. Even packaging, usually a sustainable end-use sector, is suffering from high inflation and rising living costs. Out-of-stock measures in the second half of 2022 led to weak demand in the packaging value chain. Will it continue?
3. China’s road to recovery:
2023 could be a slow burn of downstream demand. China is currently dealing with a wave of contagion after the sudden relaxation of the zero COVID policy. A second wave is widely expected after the New Moon in late January. Therefore, we expect Chinese demand to recover somewhat unevenly and slowly in the first half after a weak 2022.
4.The supply of recycled material remains a constraint.
As the demand for recycled material increases, limited supply remains a major constraint. The recycling of waste into raw materials is critical, requiring new technologies and partnerships to achieve the necessary investments throughout the value chain. In particular, it is difficult for entrepreneurs in the packaging industry to obtain high-quality food material.
In 2023, brands will continue to allocate capital to meet their cycle goals, but it will be difficult to make significant progress toward these goals. Read the full report to see the new recycled plastic (RPET) table.
5. Growing sales of electric cars offer growth potential
Electric vehicles (EV) consume 3-5% more plastic units than conventional internal combustion engine (ICE) vehicles. As the use of electric cars increases, so does the consumption of plastic. Global electric vehicle sales have grown rapidly since 2020, supported by government incentives, especially in China, Europe, and the United States. The shift to electric cars and lighter vehicles will support demand for most polymers. The most significant benefit is polypropylene, which accounts for slightly more than a third of the plastic demand in the transportation industry.
