Q3 China PE Price to Fluctuate Upwards
China’s PE market price ramped up after a decline in Q2. Most traders held a cautious and wait-and-see sentiment amid weak supply and demand. In Q3, the end demand may gradually recover, so the price will likely fluctuate upwards. However, downstream users will purchase cautiously, which will give thin support to the price. In addition, with the intensive unit maintenance coming to an end, the supply is expected to rise, which may curb the price increment.
In Q2, 2023, China’s PE market price declined first and then trended up. In April, the production peak season of the agricultural film ended, so the demand for PE dropped notably. However, international crude oil prices fluctuated at highs, improving the market sentiment. Therefore, the PE market price fluctuated within a narrow range of RMB 50/mt. With the demand weakening gradually and the international crud oil price rebounding slightly after a rise, the PE market price fluctuated downwards in May, with the largest decline seen in the LDPE price, reaching 6.86%, followed by LLDPE (5.16%) and HDPE (2.16%). In June, with units at PetroChina Lanzhou Petrochemical and Shenhua Xinjiang Energy taking overhauls and units at PetroChina Daqing Petrochemical remaining in shutdown, the supply of some grades was tight, improving the market sentiment, so the PE market price fluctuated upwards, with the largest increment seen in the LDPE price at 7.98%.
As for the supply, China’s PE output was 6,744kt in Q2, 2023, up 2.94% from Q1, 2023 and up 16.81% from Q2, 2022. The output loss was 991.8kt, up 57.43% from Q1, 2023 but down 16.75% from Q2, 2022.
In Q2, the output loss increased, but the output still climbed from Q2. This was mainly because an enterprise in North China, Sinopec Hainan Refining & Chemical and PetroChina Guangdong Petrochemical put their newly added capacity into production, pushing up China’s total PE capacity. Meanwhile, the output loss caused by unit maintenance in Q2 declined Y-O-Y mainly because of the delayed intensive unit maintenance in 2023.
As for the demand, the overall PE demand was weak in Q2. The operating rate of the agricultural film industry declined by 39%, and that of the pipe industry, injection industry and packaging industry dropped by 12%, 8% and 1% respectively. From April, the demand for mulch film gradually weakened, and new orders were limited. Most enterprises reduced their operating rates or shut their units down, so the industry operating rate declined notably. With the rising temperature and increasing rainy days, the demand for pipe and injection declined, and orders gradually dropped. On the whole, the end users arranged their production based on orders in Q2, while orders improved limitedly, so they showed tepid buying appetites with a cautious sentiment.
In Q3, most shutdown units may be restarted in H2 of July, so China’s output is expected to trend up. Meanwhile, the demand for agricultural film will improve, and orders for high-end film will increase gradually, which will improve the buying appetites and trading atmosphere. The demand is expected to recover, which will give certain support to the market. However, downstream users are increasingly cautious about feedstock procurement, so the demand may give limited support to the market. On the whole, the PE market price may fluctuate upwards in Q3, but the increment will likely be limited.
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