PE market volatility and decline in summer

I. Overall Trend

In recent March, the trend of three major PE varieties in the domestic market has shown a volatile downward trend. According to the monitoring of business associations, as of August 26, the ex-factory price of LLDPE 7042 in East China had dropped to about 7400 yuan/ton; the ex-factory price of LDPE 2426H had dropped to about 8300 yuan/ton; the ex-factory price of HDPE 5000S had dropped to about 8416.67 yuan/ton; the decline ranged from 100 to 600 yuan/ton.

II. Market Analysis

PE spot market has experienced three setbacks in recent March, falling as a whole. At the beginning of June, due to the off-season demand downstream and the continuous downward trend of linear futures, the market delivery was not smooth and petrochemical stocks accumulated. Most petrochemical enterprises in the region lowered the ex-factory price of PE, which affected the market atmosphere. Traders were pessimistic. The spot market continued to be flat as a whole, and prices were continuously lowered. In mid-June, with the ease of the international economic environment and the arrival of the equipment maintenance season, the market supply has decreased, playing a certain supporting role, and prices have stabilized.

At the end of June, futures rebounded after the fall and continued to rise, coupled with a sharp rise in crude oil, which boosted the spot market. Petrochemical raised the ex-factory price, PE market rose after falling. Traders report high trend, downstream and middlemen purchase part, the speed of consumption of goods is accelerating, replenishing warehouses into the market, the market trading atmosphere improved, and prices rose slightly.

But the prospects are not long, PE spot market fell again in mid-July. Futures trading continued to tumble downward, falling below the 8000 threshold. The market pressure mentality is obvious, downstream enterprises’wait-and-see atmosphere is aggravated, and their enthusiasm for entering the market is declining. Futures continued to decline, market trading was weak, distributors’delivery pressure increased, and the bullish outlook on the future market increased. Petrochemical enterprises have gradually accumulated inventories and factory prices have been lowered. Market cost has lost support and prices have continued to fall. At present, Petrochemical stocks have declined slightly, but the speed is slow, traders are pessimistic, accompanied by underreporting, mainly shipments. The downstream enterprises are weak in receiving goods, purchasing more on demand, running in low inventory, and the overall delivery atmosphere of the spot market continues to be light.

For downstream enterprises, the demand for film materials continued to be weak in June, with limited accumulation of manufacturer orders, a small amount of low start-up, increased demand for sunlight film compared with the earlier period, and the demand for plastic film ended, and the manufacturer gradually turned to shutdown. In July, the demand for functional membranes has been followed up. The production of large and medium-sized enterprises is general, and that of small enterprises is poor. The overall start-up rate is 3-40%, the demand is in the off-season, and the manufacturers are mostly in the state of shutdown. In August, the production of functional film enterprises changed little, orders increased slightly, sunlight film was in the peak season of demand, the production of manufacturers was relatively stable, the start-up rate was 5-80%. The demand for plastic film continues to be weak, and is still mostly in a state of shutdown. Although the peak season of greenhouse film started slowly, the intensity was not as expected, and the number of terminal orders did not increase significantly.

Import and export: In June 2019, PE exports totaled about 186,000 tons. Among them, LLDPE export volume was 0.75 million tons, which was 3.85% lower than that of last month; HDPE export volume was 0.91 million tons, which was 37.67% lower than that of last month; LDPE export volume was 0.22 million tons, which was 31.0% lower than that of last month.

3. Future Market Forecast

Business societies data analysts believe that although the current demand for agricultural film, pipe and other industries has recovered, but not as expected, the demand side slowly improved, continue to short the market. International oil prices and linear futures both fell, to a certain extent, depressed the enthusiasm of the industry to enter the market. In addition, Petrochemical continued to reduce the ex-factory price, the market cost support weakened. Some manufacturers are still in maintenance status, to a certain extent, favorable to the surrounding market, but the peak season of agricultural film started slowly, there is some room for recovery. It is expected that market consolidation or weak consolidation will dominate in the short term.