Packaging Plastic 'Corona Special'

Prices Soar Due to Increased Delivery Demand in Courier and Food & Beverage Sectors

Low-Density Polyethylene Hits $1,080 per Ton, Reaching Year-Round High

[Asia Economy Reporter Park So-yeon] As the spread of the novel coronavirus (COVID-19) has increased delivery demand in courier services and food & beverage sectors, prices of packaging plastics have surged sharply. Domestic chemical industries such as Lotte Chemical and Kumho Petrochemical, which had been struggling amid the global economic downturn caused by the COVID-19 crisis, have launched full-scale offensives to dominate the plastic packaging market benefiting from the COVID-19 special demand.

According to the price trends of major petrochemical products from the Korea Petrochemical Industry Association on the 18th, the price of low-density polyethylene (LDPE), used in manufacturing films and disposable shopping bags, reached $1,080 per ton this month, marking the highest level since January last year.

Since August last year, LDPE prices had remained below $1,000 per ton, but this month surpassed the $1,000 mark. Due to the global retail industry's eco-friendly trend, such as reducing the use of disposable plastic cups, packaging plastic prices had been on a downward trend. However, after the COVID-19 outbreak, prices sharply rose to around $750 in April, $850 in June, and $980 in August.

The industry interprets this as a "rebound effect" from the COVID-19 situation, including social distancing and the resumed use of disposable products for hygiene purposes. The strong price of the raw material ethylene also played a complex role. To prevent the spread of COVID-19, coffee shops have returned to serving drinks in plastic cups, and the use of disposable shopping bags has increased. The surge in courier demand due to the growth of e-commerce also contributed to the rise in demand and prices for packaging plastics.

Worldwide, policies banning plastic shopping bags have been withdrawn and fines waived due to concerns that recycled materials could spread viruses. Plastic zero laws, which advanced countries had been implementing one after another, have been "temporarily suspended" due to the impact of COVID-19. According to a report by Wood Mackenzie, the annual growth rate of packaging demand in the U.S., which had been controlled at about 3% until last year, is expected to soar to around 10% this year.

Combined Effects of Raw Material Price Strength and Withdrawal of Plastic Bag Ban Policies
Lotte Chemical, Kumho Petrochemical, and Others Launch Market Offensive

Not only LDPE used for product packaging but also sales of polypropylene (PP) and polystyrene (PS), used for food packaging containers, have increased. In the case of Kumho Petrochemical, PS sales rose about 12% year-on-year through last month this year. Lotte Chemical also saw margins for general-purpose (PE and plastic bags) products recover to levels seen in the booming year of 2017, due to increased demand for disposable plastic bags and plastics, combined with price collusion among regional traders expecting market improvement.

In particular, there are no plans to expand related product manufacturing facilities within this year, leading to positive outlooks for future performance. Especially, companies such as Hanwha Solutions, LG Chem, Kumho Petrochemical, and Isu Chemical are expanding production of related products, benefiting the chemical industry overall.

The chemical industry expects the trend of increased demand and rising prices for packaging-related plastics to continue for the time being due to the prolonged COVID-19 pandemic. A chemical industry official said, "Due to the impact of COVID-19, heightened awareness of hygiene and safety, and the expansion of non-face-to-face (untact) lifestyles, demand for packaging and hygiene products is increasing," adding, "With expectations that the COVID-19 situation will be prolonged, demand growth and price increases are expected to continue."

This content was produced with the assistance of AI translation services.