China PE Consumption Growth to Slow Down
Most PE downstream products are closely related to our daily lives. With the development of society and the improvement of residents’ living standards, the rigid demand for PE in various downstream fields has increased. At the same time, China’s PE industry is also facing internal and external troubles, such as substitutes and shifting overseas orders. Affected by the macro environment, the development and improvement of the processing manufacturing industry are limited. The profitability at downstream product processing enterprises is mostly from the field of special materials, while the profit space in the field of general materials is gradually shrinking. More and more traders and manufacturers are actively breaking through the difficulties. Stimulated by price arbitrage and strategic layout, China’s PE exports are facing opportunities. However, due to the small base, it only takes up 2.03% of total demand, and the improvement is relatively limited. Overall, although the growth of China’s total PE demand is slightly faster than the growth of total supply in the past five years, the growth rate has pared back.
According to SCI, the CAGR of China’s apparent consumption volume in the recent five years was 6.07%. From 2021 to 2022, the demand was weak and operating rates were at lows, and 2023 witnessed limited orders and low operating rates. However, increasing new entrants in the fields of packaging and daily necessities were seen in 2023, and traveling improved in H2 of 2023. Meanwhile, the consumption of non-durable goods kept rising.
As for PE monthly consumption, from January to March, downstream operating rates were passable supported by optimistic outlooks of the macro economy. Later in Q2, with the rising inventory of finished products and semi-finished products, limited orders within China’s domestic market as well as declined export orders, downstream enterprises mainly focused on their undelivered orders. It’s worth to be noted that, the apparent consumption was at a high level from April to May due to output and imports, but the actual consumption was limited, leading to inventory building. In addition, together with the bearish factors from the overseas market, the feedstock price kept falling, and prices of most products hit a yearly low at the end of May. From July to September, with the feedstock price staying at lows, downstream enterprises showed improving production enthusiasm amid the traditional demand peak season and consumption of previous inventory. Therefore, new orders gradually recovered, pushing up the PE price. However, after the National Day holiday, new orders increased limitedly, and most market participants held a bearish sentiment again, so traders placed their orders cautiously, and downstream enterprises mainly purchased on a need-to basis. In November, the bullish news from the policy side led to optimistic outlooks on the macro economy, while most players held a cautious sentiment. It’s estimated that the downstream demand may be stable in November and will likely improve in December supported by the sales targets and orders for the New Year’s Day and Spring Festival.
Compared with the data of the past five years, the monthly consumption of PE in 2023 was higher than the average level of the same period in the previous five years, supported by the resilience of demand, and most of the time it hovered around the high levels, indicating that the PE demand was resilient. However, it was still lower than the high level, indicating that the demand was curbed. From the perspective of actual consumption, the consumption performed better in the second half of the year, while it dropped to the lowest point in Q2 due to special circumstances.
In terms of consumption structure, thanks to the promotion of new energy, the consumption proportion of the electric wire and cable industry increased to 6.09%. That of the coating industry fell slightly by 0.14% due to the pressure of destocking in medical-related fields. As for the traditional consumption fields, the proportion of the film industry accounted for 56.79% in 2023, up 1.46% from last year. Due to the non-durability of the film products, the consumption was fast, especially in the second half of this year, when traveling increased significantly. The consumption saw great potential, but there were many enterprises in this field and they were scattered in different regions, so the increase in consumption didn’t provide support for prices. In the injection and blow molding fields, due to great destocking pressure in the first half of the year, their consumption rate was lower than that of film packaging, and their consumption proportion declined slightly. In the pipe field, affected by the downturn in the real estate industry and the decrease in newly started construction area, the proportion of pipes and profiles fell by 2.44% compared with 2019.
In the future, affected by the macro environment, the development and improvement of the processing manufacturing industry are limited. The profitability at downstream product processing enterprises is mostly from the field of special materials, while the profit space in the field of general materials is gradually shrinking. More and more traders and manufacturers are actively breaking through the difficulties. Stimulated by price arbitrage and strategic layout, China’s PE exports are facing opportunities. However, due to the small base, it only takes up 2.03% of total demand, and the improvement is relatively limited. Overall, although the growth of China’s total PE demand is slightly faster than the growth of total supply in the past five years, the growth rate has pared back.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
Please click "Read more" for the full article.
