China PE Price to Improve Slightly in 2024
In 2024, the overall macro environment is expected to gradually improve. Although there is still great uncertainty about the liquidity crunch caused by the Fed’s high interest rates, and the overall environment of China’s foreign trade market may see more pressure. However, China’s policies to stabilize economic growth continue to be vigorous, and outlooks on demand are optimistic. In addition, it will be the inventory replenishment stage of a new round of the inventory cycle, so the overall macro outlooks are optimistic.
As for the supply and demand, the demand growth is expected to outpace the supply growth. According to preliminary research, the newly added PE capacity in 2024 will be 6,300kt/a, up 19.96% Y-O-Y. Therefore, China’s supply will likely improve accordingly with an estimated growth rate of 12.97%. However, most newly added units are estimated to come online intensively in H2 of 2024, and the import volume is forecasted to drop by 1.35% Y-O-Y, so the overall supply of PE will likely ramp up by 8.26%. Meanwhile, the demand is expected to improve continuously, and China’s export volume will likely increase by 10.5% Y-O-Y, so the total demand is estimated to improve by 9.10% Y-O-Y, slightly faster than the supply growth. Although the demand will remain resilient, China’s domestic demand may improve limitedly, and exports will continue to face pressure amid a slow recovery of overseas demand.
As for the cost, international crude oil prices are estimated to fluctuate at highs. OPEC+ is expected to halt extra production cuts in January 2024, and the global crude oil demand may decline from 0.88 million barrels per day to one million barrels per day in 2024 amid sluggish global economic growth. Therefore, in 2024, the crude oil supply will gradually turn from shortage to surplus, and crude oil inventories will also start to rise from low levels. With crude oil inventories staying at lows, the crude oil price is expected to remain high.
On the whole, external uncertainties may be the key driver of commodity prices, and China’s faster demand growth will mainly benefit from its economic recovery. SCI reckons that China’s LLDPE price will hover at RMB 7,500-9,000/mt in 2024, with an average price of RMB 7,900-8,600/mt, up 0.12% Y-O-Y. The high end of the monthly average price will be RMB 8,300-9,000/mt and the low end will be RMB 7,500-8,300/mt. From the perspective of seasonality, high prices will likely appear in March, August and September. In Q1, the operating rate is estimated to stay at lows, and impacts from newly added units will be limited. Meanwhile, the demand is expected to improve after the Spring Festival. In Q3, the price will be mainly pushed up traditional demand peak season. Low prices will likely appear in June and December, mainly due to the demand slack season and supply pressure caused by newly added capacity in Q4.
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