HDPE Market Outlook in H2, 2024
Introduction: The output of HDPE in China is expected to grow in H2 of 2024 with the capacity increase in Q4. Additionally, the import volume is also likely to rise during the same period as overseas supply increases. Therefore, the total supply of HDPE in China is anticipated to show an upward trend in H2 of 2024. On the demand side, although downstream consumption volume and export volume are expected to increase, the overall growth rate of demand is predicted to be relatively low. As a result, the supply-demand pattern of HDPE in China is expected to gradually transition from tight balance to slightly excess supply.
The supply is envisaged to increase.
2024 China HDPE Capacity Expansion Plan
As of the end of 2024, the new HDPE capacity in China is expected to reach 1,700kt/a, concentrate in North China, with the total capacity in the region expected to surpass that in Northwest China. In terms of feedstock, the above new capacity will likely adopt naphtha as the feedstock, with no new HDPE capacity added using coal or light ends as feedstock.
The commissioning of new HDPE units in 2024 has been postponed. According to the research at the beginning of June, all are postponed to Q4, which may have a significant impact on HDPE market prices in North China by then. China’s HDPE capacity is estimated to reach 18,785kt/a in 2024, up 9.95% Y-O-Y.
In H2 of 2024, producers that may be involved in the overhaul include Heilongjiang Haiguo, Sinopec Qilu Petrochemical, PetroChina Dushanzi Petrochemical, PetroChina Lanzhou Petrochemical Yulin Chemical, Sinopec-SK (Wuhan) Petrochemical Company, PetroChina Jilin Petrochemical and Fujian Refining & Petrochemical. As the intensive maintenance period approaches its end, the maintenance of China’s HDPE units may gradually decrease from June to December 2024. In H2 of 2024, with the reduction of maintenance and the commissioning of new units, the output of Chinese-made goods is expected to increase.
The downstream demand is anticipated to grow at a low rate.
2024 China HDPE Typical Application Fields and Future Development
On the demand side, in 2024, the demand in typical downstream fields of HDPE may still maintain a growth trend. However, due to national policies and industry upgrades, the growth rate is expected to be relatively low. There is little room for consumption upgrading in the end industry, but consumption resilience provides support. In terms of development potential, daily packaging lies in product reform, such as single packaging and food and medical industries still have certain demand potential. The development of the pipe industry depends on urbanization and the progress of supporting projects in cities. There may be breakthroughs in specialized materials for the blow molding industry. What’s more, there is still some development potential in the injection industry in terms of waste sorting and some innovative products.
The cost support may persist with high crude oil prices.
In the macro scenario, the slowdown signal of U.S. inflation in Q2 and the central banks of major economies leading the way in interest rate cuts have strengthened the market’s expectations for interest rate cuts by the Federal Reserve in H2 of 2024. The Fed is likely to start cutting rates in September or November, with no more than two rate cuts expected. The economic data in Q3 is key to guiding when the final rate cut window opens, and the U.S. dollar index may be strong before weakening. Macroeconomic monetary policies and expected adjustments may more frequently disrupt international oil prices.
In H2 of 2024, international oil prices are estimated to fluctuate between $75-85/bbl. In Q3, which is the peak season of demand, the oil price is expected to show a strong trend. Starting in October, voluntary production cuts gradually phase out, and oil production will probably return in Q4. As supply increases and demand decreases, it is expected that the oil price may register a downward trend in Q4 and reach the lowest level of the year. Moreover, we should maintain vigilance against geopolitical risks, which may push oil prices up. Overall, the high cost support for HDPE may still exist in H2 of 2024.
Forecast: 1. The risk of structural oversupply is expected to increase in H2 of 2024.
Based on the deduction of the supply and demand model, we can see that with the increase in HDPE capacity in 2024, the domestic output may grow, the self-sufficiency rate will likely continue to increase and the dependence on imports may decrease. However, given the import data in H1 of 2024 and the expected resumption of production by overseas producers, it is anticipated that import volume may increase in H2 of 2024. Overall, the total supply volume in H2 of 2024 may show an upward trend. On the demand side, although the downstream demand volume and export volume may increase, the overall demand growth rate is expected to be relatively low. The HDPE supply and demand pattern in China may transition from tight balance to slightly excess supply, and the risk of structural oversupply is expected to increase.
Forecast: 2. Prices of most HDPE varieties are expected to sag in 2024.
As capacity continues to grow, it is anticipated that China’s HDPE output may rise in 2024. The supply of general-purpose materials is expected to gradually exceed demand, further intensifying competition among domestic petrochemical enterprises. During this period, the prices of most HDPE varieties are expected to gradually decrease, while the prices of low MI injection are expected to rise. This increase is primarily due to the intensive commissioning of new capacity in 2023, with an initial focus on low MI injection, leading to an increase in the output of Chinese-made goods and a reduction in market prices. However, in 2024, as new capacity commissioning concentrates at the end of the year, and the price of low MI injection is the lowest among all HDPE varieties, domestic petrochemical enterprises may show limited interest in arranging production for low MI injection, so the price may increase slightly in 2024. Additionally, as for the price of HDPE film, due to the intensive production after the commissioning of units at PetroChina Guangdong Petrochemical and Sinopec Hainan Refining and Chemical Company in 2023 and the large capacity, the price drop will likely be greater than other HDPE varieties.
The price fluctuation range of HDPE in China is expected to be RMB 7,850-8,750/mt in 2024. The peak of HDPE market prices in 2024 may appear in Q3, mainly affected by the traditional demand peak season, and the lowest point may appear in Q1 and Q4, mainly because it is the slack season. Especially in Q4 of 2024, as a large amount of new capacity is expected to be released, the supply side will likely face significant pressure.
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