Significant increase in domestic high-voltage production and narrowing of linear price difference

Since 2020, domestic polyethylene plants have entered a centralized expansion cycle, and the annual production capacity of domestic PE has rapidly increased, with an average annual growth rate of over 10%. The production of domestically produced polyethylene has rapidly increased, with severe product homogenization and fierce competition in the polyethylene market. Although the demand for polyethylene has also shown a growth trend in recent years, the demand growth has not been as fast as the supply growth rate. From 2017 to 2020, the new production capacity of domestic polyethylene mainly focused on low-voltage and linear varieties, and there were no high-voltage devices put into operation in China, resulting in a strong performance in the high-voltage market. In 2020, as the price difference between LDPE and LLDPE gradually expanded, the attention of LDPE products increased. The EVA co production unit and Zhejiang Petrochemical LDPE unit were put into operation in 2022, with a domestic high-pressure production capacity of 3.335 million tons as of the previous day.

In 2023, the high-pressure market showed a fluctuating and declining trend. Taking the North China market as an example, the average high-pressure price from January to May was 8853 yuan/ton, a significant year-on-year decline of 24.24%. In the peak season of demand for plastic film in the first quarter, linear prices were relatively strong. The linear average price from January to April was 8273, a year-on-year decrease of 7.42%. The price difference between high voltage and linear was significantly narrowed. As of May 23, the domestic linear mainstream in the North China market was 7700-7950 yuan/ton, while the domestic high-pressure ordinary film mainstream was reported at 8000-8200 yuan/ton. The price difference between high voltage and linear was 250-300 yuan/ton.

Overall, with the continuous expansion of domestic polyethylene production capacity and the gradual increase of domestic supply, the problem of oversupply in the polyethylene industry has intensified. Although the production cost for high voltage is slightly higher than linear, due to the substitutability of linear and metallocene in some production areas, it is difficult to support high prices and high profits in the current weak polyethylene market, and the price difference between high voltage and linear has significantly narrowed.