According to the public project planning information, the polyethylene industry may release 2.2 million tons/year of production capacity in less than two months. This is undoubtedly “worse” for the polyethylene market, which is already highly competitive. At that time, the industry competition will intensify, and the cost will be reversed or become normal.
With China’s polyethylene entering the era of large-scale refining and capacity expansion, the production capacity has increased significantly. At the same time, the newly launched resources are mainly low price products. 2021 is a year of concentrated capacity expansion of polyethylene, with 4.4 million tons of new capacity per year and 20% capacity growth. According to the plan, the new polyethylene production capacity this year is 3.95 million tons/year. As of the end of October, the production capacity has been put into operation 1.75 million tons/year. There is still 2.2 million tons/year of production capacity in the year to be put into production. In addition, from 2023 to 2024, there are still 4.95 million t/a units planned to be put into production in China, including 3 units planned to be put into production in 2023, involving a capacity of 1.8 million t/a. If the above production capacity is put into operation as scheduled, the polyethylene market will become more and more internal.
The concentrated release of production capacity will increase the operating pressure of polyethylene production enterprises. The polyethylene market in the first October of this year was the most sluggish since 2008. In the first half of the year, affected by the continuous rise of international crude oil prices, the cost support was strong, and the average price of polyethylene in the market was higher than that in the same period of 2021. However, after entering the second half of the year, the polyethylene market did not perform satisfactorily, and even the price hit a new low for nearly two years in August. The peak season of “nine gold and ten silver” was not prosperous. In particular, due to the high cost, the cost of oil made polyethylene continues to be upside down. Even in the peak selling season, this situation has not improved much, with a loss of about 1000 yuan per ton of products. In addition, due to the repeated impact of the epidemic, the inventory pressure of production enterprises is high, which may lead to a price war.
At the same time, the international economic situation is grim due to the comprehensive impact of the tightening of monetary policies in Europe and the United States, geopolitical conflicts and outbreaks in many places. Therefore, the downstream orders of polyethylene have been reduced as a whole, and the energy of replenishment of terminal factories has been greatly reduced. Most of the time, the operation mode of low inventory has been maintained, thus inhibiting the demand for polyethylene. In addition, with the enforcement of the plastic prohibition and restriction orders being strengthened, biodegradable plastics will also replace some of the demand in the polyethylene packaging field.
The domestic polyethylene spot market is mainly weak, and the three major spot varieties have been reduced to varying degrees. LLDPE market showed a trend of rising first and then falling, while LDPE and HDPE showed a trend of falling first and then stabilizing. In the week, the factory price of polyethylene was mostly lowered by 50-400 yuan/ton. In terms of demand, the current low pressure wire drawing and pipe are in the off-season, with few orders and weak downstream demand. In terms of supply, recently, some enterprises have reduced their output in terms of equipment maintenance. In addition, at the end of the month, the enterprises are willing to go to the warehouse at the end of the month, and mainly make more profits for shipment. However, the current packaging film market is favorable due to the “Double 11″ and the demand is relatively stable. The mentality of the merchants is general, and the quotation is adjusted in a narrow range, and the overall situation is also weak.
The volatility of Liansu futures market is not large, which brings limited support to the spot. On October 27, the opening price of polyethylene futures 2301 was 7676, the highest price was 7771, the lowest price was 7676, the closing price was 7692, the previous settlement price was 7704, the settlement price was 7713, down 12, the trading volume was 325,306, the position was 447,371, and the daily position was increased by 2302. (Quotation unit: yuan/ton)
In terms of current raw materials, international crude oil has risen, which has brought some support to the cost side. On the demand side, low pressure pipes and wire drawing materials are in the off-season, and the demand for greenhouse film is coming to an end. The downstream is cautious, and Duowei is making up on demand, so the enthusiasm has turned weak. On the supply side, the market output has decreased recently. It is expected that the polyethylene spot market will remain weak in the short term, but the falling space is limited.
Many negative factors have long suppressed the market atmosphere. This year’s Jinjiu bears the market’s ardent hope for a better market. At the same time, the above advantages just provide a starting point for businesses. The desire for speculation is ignited instantly, and the price center moves up significantly. However, it should be noted that the overall supply pressure of the market is still large: some units have been restarted in the early stage, and the maintenance loss in September is expected to decrease significantly; In terms of new production, Lianyungang Petrochemical Phase II 400000 tons of low pressure has been put into production; Affected by the weak demand for polyethylene from abroad, a large number of low price goods poured into China, and the import arrivals increased. In addition, considering that it is difficult for demand to break out obviously, the spot market is dominated by transactions between traders, and the epidemic situation continues all over the country, which may curb the rising trend of the market. The author believes that in the short term, there will be greater resistance for prices to continue to rise.
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Post time: Nov-24-2022