Since the beginning of the year, new production capacity has been released one after another, and the domestic polyethylene market has been declining after the Spring Festival. Up to now, the price of low-density polyethylene products has fallen by about 22.3%, linear low-density polyethylene products have fallen by about 8.99%, and high-density polyethylene film materials have fallen by about 8.67%. According to industry insiders, a large number of new production capacity will be released this year, and the polyethylene market will move forward under pressure.
Large increase in production capacity
Since the beginning of this year, Yanchangyu Energy has 300,000 tons/year of low-density polyethylene, Ningbo Huatai Shengfu full-density polyethylene 400,000 tons/year, Lianyungang Petrochemical 400,000 tons/year high-density polyethylene and Heilongjiang Haiguolong oil 400,000 tons/year Full-density polyethylene plants were put into production successively in the year, and domestic polyethylene supply increased significantly, but the demand failed to follow up in time, which put pressure on the market and lowered prices.
Entering June, the polyethylene market is still in a downward channel. Although international crude oil fluctuates at a high level of around 70 US dollars per barrel, it has not effectively boosted the domestic polyethylene market. Linear low-density polyethylene futures continued to bottom out, testing a low of 7,500 yuan (ton price, the same below). At the same time, the petrochemical ex-factory price continued to drop, which made the spot market passively follow the decline.
According to industry insiders, Qilu Petrochemical's 120,000 tons/year full density polyethylene, Fushun Petrochemical's 140,000 tons/year full density polyethylene and Lanzhou Petrochemical’s 200,000 tons/year low-density polyethylene devices are currently under maintenance. Part of Yangzi Petrochemical's equipment has been restarted. Jilin Petrochemical and Shenhua Xinjiang equipment are still under overhaul. The overall maintenance volume has decreased compared with the previous period. The polyethylene market supply pressure continues to increase, and the price increase space is limited.
In addition, this year is expected to release 5.8 million tons of production capacity. If all of these production capacities are released as scheduled, this year's polyethylene market will continue to operate under pressure.
Insufficient cost support
In terms of upstream raw materials, the ethylene market has fallen from a previous high of US$1,200 CFR Northeast Asia to US$955 at present, a drop of US$245, a drop of 20%. U.S. supplies continue to recover, and the U.S.-Asia arbitrage window may be able to open, and the ethylene market will turn downward in various ways.
According to industry insiders, the situation of the main polyethylene demonstrations is not good, and the industry mostly holds pessimistic expectations. The enthusiasm for purchasing raw materials has weakened and most of them are waiting for lower prices. In addition, the spread of the new crown pneumonia epidemic in Southeast Asia has increased fundamental uncertainty, further suppressing ethylene spot demand.
Statistics show that the price of naphtha in Japan was US$642.875 CFR Japan, while the price of ethylene was US$960/ton CFR Northeast Asia during the same period. The price difference between ethylene and naphtha was US$317.125, a decrease of 37.14% from the previous month and a year-on-year decrease of 12.85%. The annual average is $399.398.
Not only that, the negotiating atmosphere in China's ethylene market is relatively empty, and some far-month contracts are negotiated at low prices. The continuous decline in US ethylene prices may trigger a correlation effect. And with the arrival of summer, abnormal weather may affect exports and downstream consumption.
Regarding the market outlook, traders said that the current price of ethylene is relatively low, and it is difficult to form a strong support for polyethylene on the cost side.
Weak demand
Insufficient demand is an important factor in the sluggish polyethylene market. According to statistics, the operating rate of individual downstream polyethylene enterprises has declined. As the industry is in the off-season as a whole, and the epidemic in Guangzhou has a certain impact on demand, coupled with the increase in electricity consumption by residents in hot weather, downstream factories are facing power cuts. The overall situation is not conducive to the market. It is expected that the downstream operating rate may be lowered by a narrow range.
According to Wang Chunming, general manager of Shandong Ruiyang Chemical Trading Co., Ltd., the overall operating rate of agricultural film nationwide is about 10%. In the off-season of agricultural film demand, the operating rate is at a low level during the year; new orders for greenhouse film are scarce, and the operating rate of some large and medium-sized enterprises is 10% to 20%; other enterprises start or shut down in stages; plastic film enterprises mainly shut down.
Wang Chunming said that due to the severe epidemic situation in many Southeast Asian countries and China's traditional demand low season, terminal demand is still sluggish. The export of downstream products was affected by the lack of containers and the long transportation time, high ocean freight, and high export costs, and orders were significantly reduced compared with the previous period. At present, the operating rate of downstream enterprises is low, and the procurement of raw materials is mainly based on maintaining rigid demand. The industry is cautiously waiting and watching from low positions, which is difficult to exert a strong support for raw materials.
