China PE Prices to Fall from High as the Demand Seasonal Downturn Arrives
Price: Reduction in Supply Leads to an Increase in PE Mainstream Price
In April 2024, the prices of PE grades fluctuated upwards, with the fluctuation range of RMB 220-600/mt. Taking the market prices in East China as an example, LDPE products saw the largest price fluctuation. By the end of April, LDPE prices reached RMB 9,800/mt, with a monthly price spread of RMB 600/mt between the highest and lowest prices. Prices of LLDPE products increased from RMB 8,200/mt at the beginning of April to RMB 8,450/mt at the end of April, with a monthly price spread of RMB 250/mt. HDPE yarn also saw a price increase, from RMB 8,380/mt at the beginning of April to RMB 8,600/mt at the end of April, with a monthly price spread of RMB 220/mt. During the month, crude oil prices remained high, providing support on the cost side. Additionally, the significant increase in PE output loss due to unit maintenance led to a reduction in the supply of domestic goods, supporting PE spot prices. Producers subsequently raised their ex-works prices. However, the end demand was sluggish, and users were not keen on replenishing their inventories, preferring to purchase at low prices.
Inventory: Inventory Declines Month-on-Month but Remains Moderately High
According to SCI, by the end of April 2024, the total PE inventory of a petrochemical enterprise in China increased by 13.8kt compared with the same period of last year, representing a growth rate of 6.27%. The total PE inventory at sampled trading companies also increased by 21kt year-on-year, representing a growth rate of 12.81%. Compared with the same period in 2023, their inventory levels both showed an increase, but declined compared with the previous month. As of April 26, PE inventory at the petrochemical enterprise and sampled traders declined by 1.76% and 9.92% respectively compared with the previous month. The inventory at producers built up after the Qingming Festival holiday. However, as more units underwent maintenance, the overall PE output loss increased significantly, resulting in a reduction in the supply of domestic goods. Additionally, downstream users replenished their feedstock on rigid demand, leading to a gradual decline in PE inventories at producers.
Supply: Decrease in Operating Rates Leads to a Reduction in Domestic Supply
In April 2024, the PE industry operating rate was 75.43%, decreasing by 4.97% Y-O-Y, and down 5.68% M-O-M. According to statistics, the monthly PE output loss due to maintenance increased significantly compared with the previous month, reaching a relatively high level for the year. Additionally, April has 1 fewer calendar day than the previous month, leading to a decrease in PE output. Compared with March, PE output decreased by 10.01% month-on-month and 5.38% year-on-year. In terms of imports, the volume of PE imports arriving at ports in April is expected to decrease. The overall supply of PE in April decreased compared with the previous month, and the sales pressure was alleviated to some extent.
Demand: Users Showed Cautious Stances amid Weak Demand
The agricultural film demand in April 2024 turned weak. After the Qingming Festival, new orders for agricultural film significantly decreased. Film producers mainly focused on fulfilling previous orders and held low operating rates, showing thin buying interest for feedstock PE. Demand from other downstream industries did not show significant improvement, and most users produced based on orders, resulting in limited consumption of PE.
Forecast: PE Prices to Fall from High as the Demand Seasonal Downturn Arrives
Overall, the rise in PE prices in April 2024 was mainly affected by rising crude oil prices and supply reduction. From May to June, with the restart of overseas maintenance units, there is an expectation of increment in imports. Meanwhile, the output loss due to unit maintenance IN China may gradually decrease, and it is expected that there will be certain sales pressure in the PE market in the next two months. On the demand side, agricultural films have basically entered the traditional demand slack season. Many producers choose to shut down their units during the seasonal downturn, and only several operate at low loads. There may be little improvement in demand from other downstream industries, providing limited support to the PE spot market. It is expected that the PE market price will likely fluctuate downwards in May and June, 2024.
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