New Plant Commissioned, Adding Pressure to LDPE Supply

Polyethylene prices rebounded after the New Year's Day holiday, showing a "flying start" in the first month. Multiple factors pushed prices higher, with LDPE experiencing the most significant increase. From mid-month onwards, as the market pulled back, polyethylene returned to fundamentals. Coupled with the commissioning of new LDPE plants, supply pressure intensified, and prices fell from their highs. As of January 19th, the price of Shenhua 2426H had dropped to 8850 yuan/ton.

LDPEPrice rebounded after falling.

After the New Year, all varieties of polyethylene showed an upward trend, with LDPE experiencing the most significant increase. The highest price reached 9300 yuan/ton, a rise of nearly 1500 yuan/ton from its lowest price in December, an increase of 19.23%. The main reasons for this price increase are: firstly, prices fell significantly in December, leading to many companies pre-selling, and most operators covered their short positions. Secondly, rising costs provided stronger support for prices. Thirdly, the situation in Iran fueled severe emotional speculation. Fourthly, some plant maintenance, such as the temporary shutdowns at Maoming Petrochemical, Zhejiang Petrochemical, and Shanghai Petrochemical, led to tight supplies in the LDPE market. These factors combined to drive LDPE prices upward.

Starting in mid-January, as the situation in Iran eased, the market weakened and LDPE prices retreated from their highs. This was compounded by the start-up of Yulong Petrochemical's 300,000-ton LDPE/EVA plant, adding to supply pressure. On January 19th, the price of Shenhua 2426H fell to 8850 yuan/ton, a decrease of 450 yuan/ton from the high point on the 14th.

Overhaul plant startup and new plant commissioning increase supply pressure.

From the perspective of turnaround units, the LDPE units of Shanghai Petrochemical, Guoneng Yulin, Maoming Petrochemical, and Zhejiang Petrochemical have all started up. The LDPE capacity utilization rate has increased to 88.96%, up 15 percentage points from the previous low. The 300,000-ton LDPE/EVA unit of Yulong Petrochemical has started up and continues to produce LDPE in the initial stage, gradually returning domestic LDPE supply and increasing supply pressure.

Tensions in Iran ease, imported resources have arrived at port.

Table 1 Iran Shipping Schedule

Data source: Longzhong Information

LDPE With an import dependency exceeding 50% and a significant reliance on Middle Eastern countries, particularly Iran, the Iranian situation has a notable impact on LDPE prices. Previously, operators, influenced by speculation surrounding the Iranian situation, significantly increased prices and even withheld offers. However, as the Iranian situation eased, vendors began actively offering Iranian resources on Thursday of last week, leading to a marked price decline. This is further compounded by the concentrated arrival of Iranian LDPE resources at ports, resulting in a relatively ample supply of imported resources.

Downstream startups are declining, and procurement enthusiasm is not high.

PE packaging film sample enterprises' operating rate decreased by 0.8% week-on-week. Influenced by rising raw material prices, the terminal market is relatively resistant to product price increases, and new order follow-up is limited. Looking ahead to the next cycle, the average operating rate of PE packaging film sample enterprises is expected to decrease by about 4%. On the one hand, market transaction expectations are decreasing, some customized orders are being delivered successively, and the increase in regular rigid demand orders is limited, so the overall order receiving days of PE packaging film enterprises may be shortened. On the other hand, some small-scale enterprises may take holidays early or reduce production due to the poor downstream stocking before the holiday.

The overall operating rate of agricultural film during the week decreased by 1.0% compared to the previous period. Demand for greenhouse film further decreased, leading to a decline in the operating rate; the start-up of the mulch film market was slow. Looking at the next cycle, demand for greenhouse film will gradually come to an end, and the accumulation of new orders in northern regions will continue to shrink, with companies mainly focusing on digesting existing orders. Although the mulch film market has started in some regions, short-term demand support is limited. Therefore, it is expected that the overall operating rate of agricultural film will decline in the later period.

As the Spring Festival holiday approaches, the terminal industry will gradually enter the holiday period at the end of this month, with the commencement rate showing a downward trend. Stocking is mainly based on rigid demand procurement according to order conditions, which provides limited support for overall prices.

Prediction: Increased supply-demand imbalance to drive LDPE prices down from high levels.

On the supply side, domestic plants are restarting successively, imported resources are arriving at ports, and the commissioning of Yulong Petrochemical's plant is adding to the supply pressure. On the demand side, as downstream industries gradually enter the holiday season, operating rates are showing signs of weakening, and procurement is mainly driven by restocking needs, providing limited support for prices. In terms of market sentiment, entering February, the upstream and downstream inventory pressures are currently not significant, but the inventory pressure in the intermediate links has increased, and it is expected that efforts will be made to offer concessions for shipments. Overall, the supply-demand contradiction of polyethylene is intensifying, and LDPE prices are expected to fall from high levels. The price of Shenhua 2426H is expected to fall to around 8500 yuan/ton this week.