China PE Prices Fall in July Amid Weak Demand
In July, China’s PE market price showed a downward trend. Taking the LLDPE film material in East China as an example, the highest price of the month was RMB 8,635/mt, the lowest price was RMB 8,315/mt, and the average price was RMB 8,472/mt, which decreased by 1.76% M-O-M but increased by 4.31%. Y-O-Y. China’s PE market prices showed a downward trend overall amid fluctuations in July. Market players’ confidence was dented by the macro environment. The crude oil price fell this month, which chipped away at the cost support to the PE market. As for supply-demand fundamentals, the output loss due to maintenance at petrochemical enterprises increased from last month, alleviating the sales pressure on producers somewhat. However, the end demand was in the slack season, weighing on downstream producers’ orders and further affecting their consumption of feedstock. Meanwhile, the social inventory was higher than that in the same period of last year, which was attributed to the unsmooth transmission of commodity inventory. Therefore, traders lowered their offers to promote sales, but with limited success.
China PE Price in Major Regions
Unit: RMB/mt
Analysis of Main Market Drivers
1. Futures: In July, the LLDPE dominant contract price showed a downward trend amid fluctuations, and the average price witnessed a notable decrease from last month. During this period, the highest price reached RMB 8,670/mt, while the lowest was RMB 8,214/mt, with a price spread of RMB 456/mt, indicating an increased volatility compared to the last month. Influenced by the downward fluctuations in international oil prices and the traditional off-season for demand, poor sales led to a sluggish market trend, with both PE futures and spot prices showing downward trends. As the delivery month approached, the price spread between futures and spots began to narrow. The basis showed a strong trend amid fluctuations this month.
2. Demand: In July, operating rates of mainstream downstream industries ranged between 24% and 52%. Despite the increases seen in a few industries, the overall downstream demand remained in the doldrums as most downstream producers purchased a small amount of feedstock, which barely supported PE spot market prices.
3. Supply: In July 2024, about 10,200kt/a capacity was involved in maintenance. The PE output loss caused by maintenance was 520.1kt, up 69.6kt from last month. However, the overall sales fell short of expectations, leading to a continuous rise in social inventory and persistent supply pressure.
4. Cost: In July, the Brent oil average price increased by $1.99/bbl from last month, and the average production cost of PE rose by RMB 173.84/mt or 2.03% from last month. Spot prices of PE went down, with downstream users purchasing a small amount of feedstock at lows. The EXW prices of naphtha-based LLDPE averaged RMB 8,502.5/mt in July, down 0.81% from last month. The naphtha-based PE gross profit fell as the cost rose while prices dropped, and it lent limited support for market prices.
Forecast
SCI predicts that the LLDPE price in East China may decrease in August 2024, ranging between RMB 8,150/mt and RMB 8,700/mt.
1. Cost: Crude oil prices are expected to fluctuate upwards, lending support to the PE market price from the cost side.
2. Supply: The PE output loss due to maintenance in August is expected to be 74.6kt, down 90.2kt M-O-M, intensifying the supply pressure of Chinese-made goods.
3. Demand: The demand for PO film may usher in the peak season in the middle of August, and the operating rates at producers may improve gradually due to better orders. However, other downstream industries of PE may maintain stable demand as most downstream producers may purchase PE resources on a need-to basis.
In summary, it is expected that in August 2024, against the backdrop of increased supply-side pressure, the market price may move downwards.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
Please click "Read more" for the full article.
