PE Industry Operating Rate Further Declined on Sluggish Demand
Preface: After it entered the traditional slack season for downstream industries, the sluggish demand has become the main factor that dragged down the PE prices. Although crude oil prices were still at a high level, the cost support continued to weaken. The market focus mostly moved to the downstream demand. However, the orders at downstream plants were lower than those in previous years. The low operating rate resulted in slow consumption of feedstock. Amid the pressure from the demand side, PE producers cut down the operating rate and increased the maintenance plan to ease the supply pressure.
In July, China’s PE prices kept going down. Taking LLDPE film in the East China market as an example, the prices averaged RMB 8,226/mt, down RMB 600-700/mt from the high level in early July. Although crude oil prices were still at a high level, the cost support continued to weaken. The market focus mostly moved to the downstream demand. However, the orders at downstream plants were lower than previous years. The low operating rate resulted in slow consumption of feedstock. The sluggish demand has become the main factor that dragged down the PE prices. Amid the pressure from the demand side, PE producers cut down the operating rate and increased the maintenance plan to ease the supply pressure.
China-origin supply decreased
In July, the supply and demand gap diminished, so the surplus supply was alleviated somewhat. However, it was not driven by the demand improvement. On the demand side, though logistics improved, but downstream orders increased slowly. Amid the supply pressure, PE producers actively brought down the operating rate. Thus, China-origin supply decreased. According to SCI, the PE output totaled 1,904.8kt in July, down 2.57% M-O-M. As for imports, as demand in the overseas market was weak, offers to China increased. It is predicted that the import volume of PE may increase in the coming period.
Downstream demand remained sluggish
Nationwide, downstream demand for PE recovered slowly in July. According to the statistics of SCI, the operating rate at downstream plants varied. The operating rate of agricultural film industry rose by 8% to 23% on the back of slowly recovered demand. The operating rate of the stretch film industry and the daily packaging film industry rose by 0.5% to 53% and 55%. The operating rate of the blow molding industry dropped by 1% to 49% as plants were unwilling to stockpile amid the weak orders. The operating rate of the pepe industry dropped by 5% to 37%. As downstream demand was weak, orders at downstream plants were reduced. Users showed thin buying interest in feedstock.
Overall, the mainstream operating rate of downstream industries was in the range of 37%-59%. The downstream demand remained soft. Orders at downstream plants still underperformed, so users adopted a cautious stance and mainly purchased feedstock based on the standing demand.
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