China recovery raises hopes for US, Europe polyolefins

Bob Patel, LyondellBasell's CEO, says polyolefins demand in China is recovering rapidly from the economic chaos created by the coronavirus disease 2019 (COVID-19) pandemic. He is optimistic that both the US and European markets will return at a similar pace, and that the company's capacity utilization could near previous levels by the end of 2020.

 

"Demand is improving very well in China," Patel said during a webcast this morning with Lyn Tattum, vice president/events at IHS Markit and publisher of Chemical Week. "I read recently that oil consumption in China is back to almost 90% of the pre-pandemic level, and we see that in the demand for our products."

 

All of LyondellBasell's compounding plants in China are online and ramping up to full production rates, he noted. "So my hope is that the pace of recovery in China is something we can look forward to in Europe and the US as we follow the path China took, plus or minus."

 

Operating rates at the company's production units are "starting to move up slowly," says Patel. "I would expect that in the second quarter we could average 80% or so in US, and 85–90% in Europe on our cracker and polymer operating rates. I don't think we get back to full operating rates until later this year or perhaps even into Q1. Frankly, if we can retrace back to 90% of where we were before, I think that would be a very good recovery in 2020, and I think that's very possible."

 

The pandemic, which took grip outside China late in the first quarter, crippled large swaths of the economy, with divergent effects across LyondellBasell's business. Demand into packaging and medical applications, which account for about half of the company's revenue, has been resilient.

 

"Because of the lockdowns, people are doing more grocery shopping, so packaging has done quite well," says Patel. "And of course for medical applications, like the face masks and the disposable protective gear that healthcare workers wear, that comes from polyethylene and polypropylene, so those have done well."

 

The company's fuel business, which accounts for about a quarter of revenue, was hit hard. "That business really struggled in April and May with the lockdowns, but we can see that improving already as the miles driven is going up," says Patel.

 

Demand into automotive and durables, which contribute about a quarter of LyondellBasell's revenue, is lagging. "My guess is that auto and durables will follow, but a little bit later," he states.

 

Patel says all of LyondellBasell's manufacturing sites have remained online throughout the pandemic, and its Houston, Texas, headquarters staff has begun a phased return to the office. Of the company's roughly 19,000 employees, only 50 were diagnosed with COVID-19, and none of the cases was serious.