Ample supply expected, southwest linear polyethylene market stable then declines

[Introduction]: Recently, the Southwest LLDPE market has shown a fluctuating downward trend under the influence of costs and demand, falling by RMB 100–150/ton month-on-month. In June, supported by the supply-side benefits brought by plant maintenance, prices remained relatively firm; in July and August, with new production capacity coming on stream and ample market supply, prices are expected to face downward pressure.

1. Weakening costs and demand lead to fluctuations and declines in Southwest LLDPE.

Table 1. 2025–2026 Linear Price Trend Chart for the Chengdu Market in Southwest China

Unit: yuan/ton

Data source: Longzhong Information

According to statistics from Longzhong Information, the price of LLDPE in the Southwest market recently stood at 8,050-8,100 yuan/ton. With weakening costs and demand, there has been no market support, and prices have shown a volatile downward trend, down 100-150 yuan/ton month on month. On the one hand, easing geopolitical tensions have led to a 4.35% month-on-month decline in crude oil, weakening cost support; on the other hand, demand is in the off-season. The peak season for agricultural film in Southwest China has ended, with a noticeable decline in operating rates. In addition, orders from e-commerce promotional events have ended, and for packaging products such as express bags, both orders and operating rates have decreased month on month.

Next week, Sichuan Petrochemical’s full-density unit is scheduled for maintenance, while Tarim Phase II is set to come on stream in July-August. Amid intertwined bullish and bearish factors, the Southwest linear market is expected to remain stable first and then trend downward.

2. Increased maintenance, short-term bullish for the Southwest LLDPE market

Table 1 Summary of Plant Maintenance Affecting the Southwest LLDPE Market Next Week

Source: Longzhong Information

Figure 2 Resource Structure of Polyethylene Goods in the Southwest Region (Unit: %)

In terms of regional flow, the Northwest is the largest source region, accounting for 43%. The Northwest has a clear transportation cost advantage in shipments to the Southwest: 1. The Lanzhou–Chongqing Railway, the southern route of the China-Europe Railway Express, and the main Northwest–Southwest logistics corridors are well established, making full-truckload costs lower than routes դեպի the east or north; 2. Sichuan and Chongqing serve as the logistics hub of the Southwest, enabling rapid distribution upon arrival to Sichuan, Guizhou, Yunnan, Hunan, and Tibet, and covering the entire southern consumption market; 3. Shipments to Sichuan and Chongqing are more direct, involve fewer transfers, and suffer lower losses, providing traders with more stable arbitrage margins. In recent years, with the accelerated commissioning of production capacity in the Northwest, resources from Tarim Petrochemical, Yulin Petrochemical, and coal chemical industries have steadily flowed into the Southwest market.

Next week, Sichuan Petrochemical’s full-density unit will begin maintenance, and the combined impact of June maintenance on supply capacity in the Southwest China market is expected to reach 1.35 million tons. In terms of restart timing, most units are scheduled to resume operations in late June. As a result, the tight supply of LLDPE in the Southwest market will intensify, providing supply-side support for firm linear polyethylene prices.

III. Supply-Demand Mismatch, Future Prices Are Likely to Face Downward Pressure

Table 2: Statistics of Planned Polyethylene Production Facilities to be Commissioned in June 2026

Data source: Longzhong Information

According to statistics from Longzhong Information, the second phase of the Tarim project is scheduled to begin trial feedstock runs in June 2026, involving two 450,000 t/y full-density units. The units are planned to start up in July-August 2026. From start-up to stable production, capacity release is expected to be concentrated in the third and fourth quarters.

The future linear grade products include grades such as LLDPE2020F, 2010F, and 8320. Downstream applications mainly include packaging film, mulch film, greenhouse film, liner bags, and turnover boxes.

In Southwest China, downstream applications are mainly packaging film, accounting for 35%, followed by pipes at 25%, and agricultural film at 11%. Mulch film production in Southwest China is relatively concentrated, with the peak season mostly occurring from February to April. Packaging operations are relatively stable, with downstream operating rates rising from September to December due to e-commerce promotions. Overall, the peak season for downstream demand in Southwest China is mainly concentrated in the fourth quarter. With new capacity coming online in the third quarter and demand remaining weak, prices are expected to show a downward trend.

IV. Expectations of ample supply, with the linear market first stabilizing and then declining

In the medium to long term, on the supply side: In June, increased maintenance at coal chemical enterprises and Sichuan Petrochemical’s linear unit will provide support to supply. However, with the commissioning of Tarim Phase II in July-August, inflows of linear products from Northwest to Southwest China will increase, creating bearish pressure on supply. On the demand side, July-August is a period of high temperatures and the plum rain season in Southwest China, during which operating rates for agricultural film and packaging film are at low levels for the year, and there is no support from demand during the off-season. Therefore, prices are expected to remain relatively firm in June due to support, while the market is expected to come under pressure and decline in July-August amid increased supply and bearish influences. Overall, future supply will be ample, and the Southwest linear market is expected to remain stable at first before falling.