With the postponement of the production time of Sinopec's Ineos plant to the third and fourth quarters of the second half of the year, there has been no release of new polyethylene production capacity in China in the first half of 2024, which has not significantly increased the supply pressure in the first half of the year. The polyethylene market prices in the second quarter are relatively strong.
According to statistics, China plans to add 3.45 million tons of new production capacity for the whole year of 2024, mainly concentrated in North China and Northwest China. The planned production time of new production capacity is often delayed to the third and fourth quarters, which reduces the supply pressure for the year and alleviates the expected increase in PE supply in June.
In June, as for the influencing factors of the domestic PE industry, the national macroeconomic policies were still mainly focused on restoring the economy, promoting consumption, and other favorable policies. The continuous introduction of new policies in the real estate industry, the exchange of old for new products in household appliances, automobiles, and other industries, as well as the loose monetary policy and other multiple macroeconomic factors, provided strong positive support and significantly boosted market sentiment. The enthusiasm of market merchants for speculation has increased. In terms of cost, due to sustained geopolitical policy factors in the Middle East, Russia and Ukraine, international crude oil prices are expected to rise slightly, which may increase support for domestic PE costs. In recent years, domestic oil to petrochemical production enterprises have suffered significant profit losses, and in the short term, petrochemical enterprises have a strong willingness to raise prices, resulting in strong cost support. In June, domestic enterprises such as Dushanzi Petrochemical, Zhongtian Hechuang, and Sino Korean Petrochemical planned to shut down for maintenance, resulting in a decrease in supply. In terms of demand, June is the traditional off-season for PE demand in China. The increase in high temperature and rainy weather in the southern region has affected the construction of some downstream industries. The demand for plastic film in the north has ended, but the demand for greenhouse film has not yet begun, and there are bearish expectations on the demand side. At the same time, driven by macro positive factors since the second quarter, PE prices have continued to rise. For terminal production enterprises, the impact of increased costs and profit losses has limited the accumulation of new orders, and some enterprises have seen a decrease in their production competitiveness, resulting in limited demand support.
Taking into account the macroeconomic and policy factors mentioned above, the PE market may have shown a strong performance in June, but expectations for terminal demand have weakened. Downstream factories are cautious in purchasing high priced raw materials, resulting in significant market trading resistance, which to some extent suppresses price increases. It is expected that the PE market will first be strong and then weak in June, with a volatile operation.
Post time: Jun-11-2024