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Because Chinese PE demand is weak and pricing is flat despite significant operating rate cuts, PE exporters are looking for scenarios showing how energy shortages might affect European PE production. The significant price disparity between Europe and China remains, using LLDPE as an example of similar patterns in LDPE and LLDPE. The gulf first became visible in early 2021.

Global petrochemicals demand skyrocketed before most people realised what was going on. Exports of petrochemicals to China and domestic demand in China soared compared to the GDP declines. Petrochemicals were required to manufacture all of China's exports of durable finished goods, the demand for which was boosted both by stimulus and by the boredom of middle-class Westerners trapped in lockdowns. However, it is a very different story, with inflation at its highest level since the 1970s, leaving Western governments little room to launch similar stimulus due to higher interest rates.

In any case, most people do not purchase a new computer, washing machine, refrigerator, game console, or set of home office furniture every year. Such purchases are typically more infrequent, so 2022 even without the impact of the Ukraine-Russia conflict on inflation was always likely to see a temporary drop in demand for durable goods. There is also a chance that if lockdowns are not re-imposed, Westerners will buy more services than durable goods for the rest of the year. If they can afford international flights and hotel stays, inflation also increases the cost of services.

Here's another reason to doubt China's ability to export itself to recover in the second half of this year: Additional supply chain disruptions, because of the Ukraine-Russia conflict and China's Zero covid policy, are limiting the availability of durable goods that Westerners still believe they can afford.

This still leaves China's option to rely on the tried-and-true axiom that the worse things get, the better they will soon bring. Following temporary periods of lower economic growth, China has launched a significant economic stimulus on every occasion in the last 20 years.

As they warned three weeks ago, China is in danger of losing control of economic events, and however sensitive this additional challenge is, it must be addressed: If Western divisions with Russia persist and China maintains its close relationship with Russia, the risk of secondary sanctions against the Chinese economy cannot be ruled out.

Not surprisingly, two months of data cannot be extrapolated into a firm trend for any given year. Nonetheless, consider the possibility that China will need at least the rest of this month to contain the latest coronavirus outbreak.

Consider that for most forecasts for 2022 polyolefins demand growth to be correct that it will be in the high single digits across all grade’s consumption growth would have to be around 12 percent in H2 to compensate for the disappointing numbers in the chart at the beginning of this section of the post.

Unforeseen incidents can be surprising, as they were in 2020. However, there is a considerable risk that China will fail to meet its official GDP growth target of 5.5 percent this year.