Aug PE Price to See Limited Rise on Increasing Supply
In July, China’s PE market price fluctuated upwards. Although the demand peak season of agricultural film is coming soon, the supply is estimated to rise with China’s PE units resuming production and arrival of imported resources. Therefore, SCI reckons that the PE market price will improve limitedly in August.
In July, China’s PE market price fluctuated upwards. The crude oil price trended up in July, giving strong support to the PE market. Meanwhile. The output loss caused by unit maintenance remained at a high level, so the supply was not under pressure. In addition, the supply of some grades remained tight. Therefore, the PE market price fluctuated upwards. However, orders at downstream enterprises improved limitedly, curbing the increment in PE prices. As of July 27, the average price of LLDPE in East China was RMB 8,290/mt, up 2.73% M-O-M. That of LDPE was RMB 8,800/mt, up 3.51% M-O-M. That of HDPE was RMB 8,640/mt, up 3.28% M-O-M.
As for China’s domestic supply, units at PetroChina Daqing Petrochemical and PetroChina Lanzhou Petrochemical remained in maintenance. In addition, newly added maintenance was seen at Shaanxi Yanchang Coal Yulin Energy and Chemical, Sinopec Yanshan Petrochemical and Wanhua Chemical Group. Therefore, the output loss remained at a high level. In July, China’s PE output was 2,180.5kt in July, and that of HDPE, LDPE and LLDPE was 1,003.2kt, 220.7kt and 956.6kt respectively. In August, with the unit maintenance at PetroChina Daqing Petrochemical and PetroChina Lanzhou Petrochemical coming to an end, China’s PE output loss will likely decline, so the supply of Chinese-made PE will improve.
As for imports, the demand in Europe and the U.S. remained weak, so more overseas resources flowed into China. In H2, some low-priced imported resources from North America increased and the import volume trended up. The import volume in July is estimated at 1,094.6kt, up 1.62% M-O-M. In August, with the exchange rate of USD falling continuously, the import profits may improve, which will increasing traders’ buying appetites. In addition, as units in the Middle East and Southeast Asia will remain in normal production, the supply will be stable. Therefore, the import volume in August will likely continue to rise on increased overseas supply.
The downstream demand changed limitedly in July, and most downstream enterprises purchased on a need-to basis. As of July 28, the operating rate at agricultural film enterprises increased by 2% to 23% from last week, and orders for high-end film were passable, while those for anti-aging & anti-dripping film and mulch film improved limitedly. Enterprises purchased PE cautiously on a need-to basis. As for the pipe industry, operating rates of enterprises with favorable orders were around 50% and those of most enterprises were merely 10%-30%, so the overall demand didn’t change much. In August, with the upcoming demand peak season of greenhouse film, order may pile up gradually. However, the demand from other downstream industries may improve limitedly, so the overall demand will recover slowly, which is likely to give thin support to the PE market.
On the whole, the crude oil price will stay at highs, which will give the PE market support from the cost side. As for the supply, with China’s PE units resuming production after maintenance, the supply of Chinese-made PE will likely improve. Meanwhile, the import volume is estimated to rise, which may increase the supply pressure. As for the demand, the production of PO film will enter a peak season, and orders for anti-aging & anti-dripping film and mulch film are expected to rise limitedly. However, the demand from other downstream industries will likely recover slowly. Therefore, SCI reckons that China’s PE market price will improve limitedly.
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