LDPE Price: N-Shaped Trend in H1, to Fall after a Rise in H2
In H1, 2023, China’s LDPE market price showed an N-shaped trend, which declined from H1, 2022. The international crude oil price gradually trended down, giving weakening support to the price from the cost side. Meanwhile, the supply improved, while the demand was sluggish, dragging down the LDPE market price notably. In H2, the international crude oil price is expected to fluctuate upwards, and the demand may improve on the continuous recovery of China’s economy. Therefore, the price may fluctuate upwards from July to October. In November, both the release of the newly added capacity and demand slack season may weigh down the price.
In H1, 2023, China’s LDPE price showed an N-shaped trend, which was basically aligned with the forecast in 2022-2023 China LDPE Market Annual Report. From January to June, China’s LDPE price averaged RMB 8,781/mt, down 18.17% Y-O-Y. As of June 30, China’s LDPE price was RMB 8,750/mt, down 3.85% from early 2023.
In H1, 2023, the high level of LDPE price appeared in end-January, reaching RMB 9,400/mt. On the one hand, the crude oil price rebounded after a decline, giving certain support to the price. On the other hand, market participants held a strong bullish sentiment around the Spring Festival, pushing up the price. However, as the downstream export orders declined and the end demand was limited, downstream users showed tepid replenishment appetites with the upcoming demand slack season. Therefore, the LDPE price fluctuated downwards and declined notably in May. By the end of May, the LDPE price was RMB 8,150/mt, hitting the lowest level in H1, 2023. In June, the LDPE price rebounded slightly due to the declined supply caused by increasing unit maintenance.
1. Both Production Cost and Profit Declined
In H1, 2023, production costs of different production technologies trended down from H1, 2022. Therein, the average production cost of naphtha-based LDPE was RMB 9,586/mt, down 13.25% from H1, 2022. That of coal-based LDPE was RMB 9,513/mt, down 1.33% from H1, 2022. Meanwhile, the LDPE price declined from H1, 2022, so the profit from producing naphtha-based and coal-based LDPE in H1, 2023 averaged RMB -968.79/mt and RMB -670.44/mt.
2. Supply of Chinese-Made & Imported LDPE Improved
In recent years, China’s LDPE capacity growth rate increased first and then declined. From 2019 to 2020, no newly added LDPE units were put into production. In 2021, Shaanxi Yanchang Coal Yulin Energy and Chemical put its 300kt/a LDPE unit into operation, and the 400kt/a LDPE unit at Zhejiang Petroleum & Chemical (Phase II) came online in 2022, so China’s total LDPE capacity reached 3,635kt/a as of 2022. In H1, 2023, no newly added capacity was seen, while Ningxia Baofeng Energy plans to put its 250kt/a LDPE unit into production in December 2023.
According to SCI, China’s LDPE output was 1,635.4kt in H1, 2023, up 10.02% from H1, 2022. Therein, the monthly output was lowest in June due to the intensive unit maintenance, and it was highest in January with more natural days and the lowest output loss.
The monthly output of LDPE in H1, 2023 showed a Y-O-Y uptrend in each month as the output loss caused by unit maintenance was lower than that in 2022. In June, with LDPE units at PetroChina Daqing Petrochemical, PetroChina Lanzhou Petrochemical and Shenhua Xinjiang Energy taking overhauls, the output loss increased.
In H1, 2023, China’s LDPE import volume is estimated at 1,482.4kt, up 0.51% from H1, 2022. Affected by the delayed customs clearance due to Spring Festival and the recovering economy, the monthly import volume in March reached the highest level in H1, 2023. In April, the overall supply in the Middle East declined affected by the unit maintenance. Meanwhile, China’s LDPE supply was ample, and the demand was in a slack season, so China’s LDPE market price was at a low ebb in the globe, dampening the importing appetites. Some imported resources flowed to regions with more arbitrage opportunities.
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