Q1, 2022 China LDPE Market Review and Q2 Forecast
China’s LDPE market showed an M-shaped trend in Q1, 2022, with the overall price being slightly higher than last year. The average price of LDPE was RMB 11,890/mt in Q1. In Q2, the supply is expected to inch, but downstream demand may be sluggish. It will be difficult for the LDPE market to improve in Q2, and players need to pay attention to the crude oil fluctuations and the market resources digestion.
The average price of LDPE was RMB 11,890/mt in Q1, up 4.9% Y-O-Y and down 3.9% from Q4, 2021. The highest LDPE price was RMB 12,400/mt in H1 February, while the lowest price was RMB 11,500/mt in H2 February and mid-March.
In January, players gradually left the market for the Spring Festival holiday. The spot prices were largely stable amid the insipid trading atmosphere. In February, affected by the rising crude oil price, the LDPE witnessed a short-term increase. Given the high inventory at producers and the slow recovery of downstream demand, the price returned to a rational level in H2 February. In H1 March, producers lifted the EXW price, as the cost side was supported by the increasing crude oil prices. In H2 March, the crude oil price fell. Meanwhile, the downstream demand was weak, and users showed limited acceptance in high-priced resources. Prices of LDPE fell again.
As for capacity, there were only two enterprises that added new LDPE units from 2017 to 2021. Therein, the 370kt/a LDPE unit at Zhongtian Hechuang Energy come on stream in 2017. There was no newly added LDPE unit from 2018 to 2019. Compared with LLDPE and HDPE units, it is more difficult for the LDPE unit to operate under a high-pressure environment. In addition, the spread between LDPE and LLDPE was small during the period from 2018 to 2019. In 2020, the widened spread between LDPE and LLDPE ignited the enthusiasm for LDPE units commissioning again. The 300kt/a LDPE unit at Shaanxi Yanchang Coal Yulin Energy and Chemical went into production in Q1, 2021.
In Q1, 2022, the 400kt/a LDPE unit at Zhejiang Petroleum & Chemical Phase II was put into use in H2 March and started to produce 2420H. The production was stable and the units were switched to produce 2426H successfully. The products will enter the market gradually in Q2. Currently, China’s LDPE capacity reaches 3,635kt/a.
In terms of output, China’s LDPE output was 737.2kt in Q1, 2022, down 9.7% Y-O-Y. As shown in the above chart, the output loss due to the maintenance did not change obviously, so the main influence factor was mainly attributed to the switched production. As some units can produce both LDPE and EVA, the production of LDPE will be switched to EVA production, given the different profit levels.
In Q2, 2021, many of China’s LDPE units will undergo turnarounds. 2022 is not a big year for intensive maintenance, so many units will be only shut down for small turnarounds, except for the LDPE unit at Sinopec Maoming Petrochemical. In addition, the products produced by the 400kt/a unit at Zhejiang Petroleum & Chemical will gradually enter the market, so the supply of China-origin LDPE will increase in Q2, 2022.
As for import volume, the import volume of LDPE from January to February dropped by 11.9% Y-O-Y, but the imported resources still accounted for a high market share. In early 2022, the international crude oil price was at a high level, giving some support to the LDPE market from the cost side. Foreign suppliers tended to stay firm on the prices amid the cost pressure, so the import volume seemed hard to improve.
In Q2, 2022, the production of the LDPE unit at Zhejiang Petroleum & Chemical will gradually enter the market. In addition, 2022 is not a big year for intensive maintenance, so many units will be only shut down for small turnarounds. Therefore, the output is expected to increase compared to last year. As for import volume, it is predicted that the import volume will remain stable. The current inventory level at ports at traders was at a medium-to-high level. Besides, transportation in some regions is hindered, dampening the consumption of feedstock. Overall, it will be difficult for the LDPE market to improve in Q2, and players need to pay attention to the crude oil fluctuations and the market resources digestion.
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