China LLDPE Price to Trend Down in 2023
In 2022, China’s LLDPE market saw declined capacity utilization rate, decreased imports and low downstream operating rates affected by high costs but low profits. Therefore, the prices saw more falls than rises amid multiple bearish factors. In 2023, the overseas economy is estimated to show a downtrend. Meanwhile, with the release of newly added capacity and inflow of low-priced imported resources, the price in China’s market is predict to trend down, while the decline will pare back affected by high costs.
From January to November 2022, the LLDPE prices saw rises and falls, and the most obvious downtrend was from June to August. Taking the LLDPE price in North China as an example, as of November 24, the LLDPE price fluctuated within the range of RMB 7,800-9,550/mt, averaging at RMB 8,593/mt, up 0.29% Y-O-Y. The highest price was RMB 9,550/mt in H1 March and the lowest one was RMB 7,800/mt in H2 August. The price spread between the two was RMB 1,750/mt.
The main reasons for the rises were explained as follows:
In Q1, the international crude oil prices increased due to energy shortage and geopolitical issues, improving the bullish sentiment in the overall commodity market. Meanwhile, some naphtha-based PE producers reduced or suspended production amid high crude oil prices, giving strong support to the LLDPE price from the supply side.
In the middle of Q2, the overall commodity market sentiment was supported by bullish macro factors, so the trading atmosphere improved in the spot market, pushing up the LLDPE market price.
With the demand peak season in September and October, the crude oil prices increased to around $90-100/bbl, improving the market sentiment. In addition, China’s producers started intensive unit maintenance, giving some relief to the domestic supply pressure. Meanwhile, the downstream consumption was in a traditional peak season from September to October. Therefore, the price increased amid bullish factors from both supply and demand sides.
In 2022, the LLDPE price showed an overall downtrend, mainly caused by the weak demand. Especially, the overall orders and operating rates declined Y-O-Y during the traditional demand slack season from June to August, interrupting the consumption of inventory and weighing down the prices. Some producers suspended production or lowered operating rates amid high costs and tepid downstream demand, trying to control the prices by reducing the output. Meanwhile, the overseas economy was even worse, leading to increasing arrivals of low-priced imported resources at ports. In November, the LLDPE price started to move sideways with the demand peak season coming to an end.
SCI reckons that China’s LLDPE market will turn from a tight balance to ample supply, so the price is estimated to recover first and then trend down. The supply and demand fundamentals will remain the main price drivers. As for supply, the newly added capacity will be intensively seen, and price competition will intensify amid structural oversupply. In addition, with the consumption upgrading and development of green economy, the LLDPE demand growth may be impacted. It’s estimated that in 2023, China’s LLDPE price may hit the bottom first and then recover slightly, fluctuating within the range of RMB 7,500-9,300/mt.
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