PE Industry Inventory to Pile Up in Sep
Introduction: The PE industry faces a volatile situation in 2024. Inventory, particularly the inventory at ports, increased in August, while inventory at producers and traders varied. Meanwhile, the apparent consumption volume showed an increasing trend. It is expected that the inventory may show an upward trend in September. Despite differences across sectors, the market trend is envisaged to be influenced by the increase in supply and feedstock procurement based on rigid demand by downstream producers.
1. In August, the increase in PE inventory mainly concentrated at ports.
The PE inventory in August increased by 1.65% M-O-M and 31.71% Y-O-Y. The increase in the inventory at ports was especially notable, reaching 494.6kt by the end of August, an increase of 25.5kt from last month. Meanwhile, inventory at producers and traders saw slight declines. By the end of the month, the PE inventory at producers stood at 310kt, down 5.5kt M-O-M, and that in the same period last year was about 304kt. The inventory at traders hit 167.2kt, which decreased by 4.3kt from last month, with about 157.6kt in the same period last year. This month, PE prices fell before rising. As the heavy maintenance season among domestic PE producers came to a halt, the supply of Chinese-made goods was expected to rise. Although the volume of imports arriving at ports was expected to inch down, it might still be high, thereby increasing the overall supply pressure. On the demand side, most downstream industries registered sluggish performance. As a result, downstream producers mainly purchased feedstock based on rigid demand, which hardly supported the market price. The social inventory also increased this month, which resulted in the downward trend of market prices. However, towards the end of the month, affected by the unit maintenance at producers such as Zhejiang Petroleum & Chemical, the supply of LDPE was expected to fall. What’s more, the peak season of agricultural film drew near, and the feedstock inventory at downstream producers was relatively low, which boosted market sentiment. Therefore, spot prices rose, with transactions mainly driven by rigid demand.
2. China’s PE apparent consumption volume might continue to grow in August.
China PE Apparent Consumption Volume
Data shows that in July 2024, the apparent consumption volume of PE was estimated at 3,438.7kt, an increase of 8.92% Y-O-Y. Among them, the apparent consumption volume of LLDPE grew by 1.15% Y-O-Y, that of LDPE by 4.27%, and HDPE by 18.45%. On a M-O-M basis, the apparent consumption of PE increased by 11.46%, with LDPE by 10.06%, HDPE by 5.45%, and LLDPE by 19.71%. This growth was mainly attributed to the significant increase in import volume and output by domestic producers, especially after the decline in overseas demand, while the export volume of PE decreased, resulting in a significant rise in apparent consumption volume in July. In August 2024, fewer units were involved in maintenance shutdowns compared with July, which increased the overall supply of Chinese-made goods. Meanwhile, the import volume inched down, but it was still at a relatively high level. The continuous drop in prices weighed on downstream users’ buying interest, leading to inventory accumulation at different segments. Therefore, SCI predicts that the apparent consumption volume of PE in August might reach about 3,483.3kt.
3. The overall PE inventory is expected to show an upward trend in September.
It is predicted that the PE output loss due to maintenance in China may be 285.2kt in September, down 61.5kt M-O-M. Out of the total, LLDPE will likely take up 120kt, LDPE may take up 7.2kt and HDPE may take up 158kt. From September to November, China’s PE output loss due to maintenance may drop to a medium-to-low level with significantly fewer newly-added unit overhauls. What’s more, some new units are expected to be put into production in Q4, so the supply of Chinese-made PE will likely rise. The import volume is estimated to decrease slightly with continuously high USD exchange rate and diminished arbitrage opportunities due to higher ocean freight in July. Currently, the PE inventory at the major ports is estimated to be 490.1kt, down 1.07% M-O-M. From September to November, the import volume may climb with the gradual recovery of domestic demand in China. In September, the demand for anti-aging and anti-dripping film and mulch film may improve, and the operating rate of the agricultural film industry may rise to a high level with better orders. However, the operating rates of other downstream industries may remain between 40% and 60%, with no significant improvement. Overall, the supply may show an increasing trend, while downstream producers outside of the agricultural film industry may maintain small amounts of feedstock procurement based on rigid demand. Therefore, it is anticipated that the inventory in September may rise from August.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
Please click "Read more" for the full article.
