How PE Industry is Changing in the Peak Season?

Although the traditional peak season of PE industry was approaching, the PE prices didn’t see obvious increases. Despite the PE prices in individual areas inched up, those in most areas went sideways, and the downstream demand was tepid. How the PE industry develop in the near term?

Demand will turn better.

The downstream demand for PE will gradually recover from September. The production of mulching film and shed plastic film will improve. Coincides with the National Day holiday and the Mid-Autumn festival holiday, the demand from downstream users are expected to climb quickly. With the upcoming Double 11 event, Christmas, and other holidays are approaching, the demand for PE from packaging industry will rise notably.

Supply growth will be limited.

The output of LLDPE has started decreasing since March 2018, and remained at a low level subsequently due to the intensive turnarounds. Although the LLDPE units at Shenhua Xinjiang Energy, PetroChina Daqing Petrochemcial and Shenhua Ningxia Coal Chemical will restart in early September, the 300kt/a LLDPE unit at Shenhua Baotou Energy will be shut for 20 days from early September, thus the supply growth of LLDPE will be limited.

Crude oil prices fluctuated at a high level.

The supply of crude oil kept tight due to the trade spat. In recently, EIA issued data showed that the commercial crude oil stocks excluding strategic reserves in the U.S. fell by 2.566 million bbl to 405.8 million bbl in the week of August 24, with an expected decrease of 1.487 million bbl. The stocks of crude oil in the U.S. declined more than expected, providing support to the price of crude oil. China’s independent refineries have begun to purchase large quantities of imported crude oil with the advent of autumn and winter. Meanwhile, major oil producers such as Venezuela and Iran are likely to suffer supply disruptions, which could further push up the price of crude oil. Generally speaking, the PE market has some favorable factors to support, but in later period, it still need to pay close attention to the crude oil capacity, trade spat process and the U.S. sanctions against Iran.