In 2019, the PE market trend is fluctuating downward. Among them, LLDPE fell by 20.54%, HDPE by 19.9% and LDPE by 11.76%. On the one hand, supply demand and terminal purchase are weak, on the other hand, the trade environment is complex and changeable, which has a great impact on the domestic spot market. In addition, the demand for polyethylene terminal in 2019 is mainly rigid. In 2019, the capacity of new polyethylene investment devices at home and abroad will exceed 8 million tons / year. According to statistics, the total output of plastic products in January August 2019 will be 60.669 million tons, an increase of 8.1% year on year. Many factors contributed to the ups and downs of the polyethylene market, continuous bottom. Let’s see in detail:
2、 Market analysis
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In the first quarter, the PE market overall fell. As the Spring Festival holiday approaches in January, the lack of demand expectation leads to the cautious attitude of the industry, which is mainly based on wait-and-see. With the arrival of the Spring Festival holiday, the downstream factories gradually enter the holiday. The lack of demand expectation, the enthusiasm of the downstream market is weakened, the market transaction atmosphere is weakened, and the spot market atmosphere is pessimistic. After the festival, the downstream production resumed, the operating rate increased, and some of them were purchased in the market. However, petrochemicals have accumulated a large amount of inventory, reaching over 1.1 million tons. Petrochemicals has increased its efforts to reduce inventory, and its terminal mentality is cautious. Its enthusiasm for entering the market has obviously turned weak, and the contradiction between supply and demand has increased. However, supported by the easing of Sino US trade war, tension in the Middle East and OPEC production reduction, crude oil rose in a wave and WTI and Brent continued to rise. Crude oil plays a supporting role in polyethylene market. PE market is stable and down.
In the second quarter, PE market fell in shock. At the beginning of the quarter, the overall market rebounded slightly. Affected by the peak demand season of the downstream agricultural film and mulch film in the first quarter, and the continued upward oil price in the beginning of the month, some manufacturers were in the state of maintenance, which was good for the surrounding market, and petrochemical’s strong price mentality was obvious. Under the influence of tax reduction policy, the market is also favorable, the trading atmosphere is more positive, and the price rebounds slightly. But the good times didn’t last long, and then the market fell one after another. After entering the second quarter, as the demand for agricultural film and mulch film gradually decreased, the price support of downstream demand for PE began to weaken. Affected by the Sino US trade war and other aspects, plastic futures began to dive, affecting the market mentality. In addition, the continuous supply of imported goods has led to continuous price reduction. However, due to the poor economic environment and demand, the middlemen and the downstream are mostly purchasing on demand and operating in low warehouse. As a result, PE’s social inventory declined slowly and remained at a historical high level. Some petrochemicals cancelled the price increase sales and lowered the factory price one after another. Although crude oil and futures rose sharply at the end of the month, and merchants tested the high report, the terminal still maintained just in need of replenishment, and the downstream demand was poor. With sufficient supply and high social inventory, suppliers can only gradually reduce the sales price. It is difficult to close a deal at a high price. PE market continued to weaken.
In the third quarter, due to the arrival of the traditional supply period, it should be the peak season of the plastic market, but the peak season effect is not obvious due to multiple negative effects. There are many changes in the downstream operation mode, and the manufacturer’s procurement is more rational. Futures rebounded after the fall at the beginning of the quarter and continued to rise. In addition, crude oil rose sharply, which boosted the spot market more and rose slightly. But the good times are not long. The PE spot market fell again in mid July. The increase of futures positions continued to fluctuate and fell below the 8000 level. The market pressure mentality is obvious, the wait-and-see atmosphere of downstream enterprises increases, and the enthusiasm for entering the market decreases. Futures continued to decline, market trading was weak, the pressure on distributors to ship increased, and the bearish attitude towards the future market increased. The stock of petrochemical enterprises is gradually accumulated, and the ex factory price is lowered one after another. The cost side of the market lost its support and the price fell continuously. In the later stage, although the petrochemical inventory decreased, the speed was slow, the traders were pessimistic, accompanied by low reports, and the delivery was the main thing. The downstream enterprises have weak intention of receiving goods. They purchase on demand and operate with low inventory. The overall trading atmosphere of the spot market continues to be light. It was not until mid September that the market stopped falling and rising. Affected by the rebound of futures bottoming, the industry kept a bullish attitude towards the future market. Petrochemicals has entered a rapid inventory removal cycle, and the factory price has been continuously increased. This is obvious in LDPE, with a large increase of 4.9% in the third quarter.
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In the fourth quarter, the polyethylene market is lack of obvious good, and the market performance continues to be weak. Although the beginning of the season is still in the “silver ten” peak season, but the downstream orders are not as good as the previous years, and the raw material prices are more bearish, mainly for just need to get goods, and the market shipping pressure still exists. In October, the stronger oil price and futures, together with the rise of petrochemicals, supported the market to a certain extent, while the spot price was relatively strong, mainly with narrow adjustment. In the middle of the quarter, futures continued to break, striking market confidence was obvious. In some regions of petrochemicals, prices were continuously lowered, cost support was weak, businesses kept and dumped goods, and the three varieties all fell to varying degrees. The enthusiasm of downstream factories to enter the market is still not improved, and they always hold a wait-and-see attitude. The factory’s shipment continues to be poor, and the transaction atmosphere is light. In the later period, with the shock of linear futures rising, merchants’ mentality was better, and more positive reports were made, but the atmosphere of taking goods downstream did not improve, so they continued to suppress the market mentality. The plastic market only rebounded slightly, and then continued to be weak.
3、 Future forecast
In 2019, the overall trend of polyethylene is in a downward trend, until the end of the year, the degree of profit is relatively limited, and the market is still low, weak and short. PE analysts of the business association believe that the supply side pressure of PE is still relatively large, the demand side is still in the pattern of oversupply, and the price of PE is already in the low position. It is expected that the market will continue to be weak in 2020. In addition to the large fluctuations that may occur in the maintenance season and the downstream traditional procurement season, the overall change range will be eased compared with this year.
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