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Off-Season Demand Weighs, Polyethylene Market Expected to Fluctuate Under Pressure

Plastmatch 2026-07-06 20:35:14

In the first half of 2026, the domestic PE industry saw relatively few new capacities actually come on stream. Affected by the inversion of raw material costs and widespread industry losses, the willingness of existing production units to operate continued to decline, and the overall industry operating rate has currently fallen to72%-75%In July, the demand for PE downstream industries enters a traditional consumption cycle switching point: the agricultural film industry demand has bottomed out and stabilized, the demand for hollow packaging raw materials has entered the traditional peak season, and the demand for plastic pipes is significantly suppressed by the summer heat. The core contradiction in the market focuses on: the industry will move towards this month.Reduce production to maintain pricesstill into the above-mentioned contentLow-price cutthroat competition？

1. Supply Side: New capacity delays in launch, short-term tightening of spot supply due to equipment maintenance.

Currently, the majority of newly announced and expanded PE projects in the industry have postponed their production plans to the fourth quarter of 2026 or even 2027. The short-term easing of new supply pressure is the core fundamental support for the PE market prices being at a low level, but not experiencing a deep collapse at this stage.

In addition, several major domestic petrochemical enterprises are scheduled to carry out routine maintenance on their units in July, involving core production facilities such as Shenhua Xinjiang’s high-pressure unit, Yanneng Chemical’s low-pressure unit, Lanzhou Petrochemical’s high-pressure unit, Daqing Petrochemical’s linear unit, and Guangdong Petrochemical’s No. 1 full-density unit. This round of concentrated maintenance will directly reduce the circulating supply of general-purpose plastics in July, providing phased bottom support for PE market prices from the spot supply side.

II. Spot Market: Restocking for Immediate Needs Drove a Slight Rebound, but the Overall Weak Market Trend Remains Unchanged

Using mainstream spot quotes for LLDPE linear film-grade material in North China as the observation sample: current market prices have rebounded slightly by RMB 150-200/ton from the phase low of RMB 6,950-7,100/ton seen in late June. This modest upswing is mainly driven by downstream processors making just-in-time replenishment at historically low raw material prices, as well as the fulfillment of earlier expectations for petrochemical unit maintenance shutdowns.

However, from the perspective of market trends, the current rebound is relatively weak, with insufficient trading follow-up, and has not reversed the medium- to long-term downward trend in the market. The weak industry sentiment continues to persist. (Data source: Jin Lian Chuang)

III. Assessment of Core Influencing Factors

1. Summer high temperatures and regional power rationing policies

North China has issued a high-temperature meteorological warning for early July, and downstream plastic product processing enterprises in the region have gradually begun staggered power consumption production modes. Preliminary estimates indicate that the current early-stage power rationing policy will drag down the overall downstream operating rate by 3%-5%, exerting less pressure on the demand side than in the same period in previous years. Close attention should be paid to policy changes in late July: if North China launches widespread mandatory industrial power rationing, downstream processing operating rates may fall sharply, further weighing on PE spot prices from the demand side.

2. The implementation of special-purpose bonds, with a time lag in driving demand for pipes and tubes

The second batch of local government special bonds for 2026 was intensively issued in late June. The funds are mainly directed toward infrastructure projects such as urban pipeline network renovation, which will provide long-term support for demand for PE raw materials used in pipe production. However, judging from the transmission pace of the projects, there is a lag between fund disbursement and the commencement of construction and material input. The policy dividend is therefore expected to be released mainly in August and September, while its direct boost to PE demand in the pipe segment will be limited in July.

3. Progress of commissioning for the new Zhongsha facilities in Gulei (Q3 core variable)

The commissioning progress of the Zhongsha Gulf PE plant by the end of the third quarter is a key variable on the supply side for the second half of the year: if the plant starts production and the raw material discharge is advanced to August-September, the domestic supply of LLDPE and HDPE spot goods will significantly expand, exerting noticeable downward pressure on the market prices of related varieties.

4. Fluctuations in international crude oil cost futures prices

Crude oil is the core cost foundation for PE production, and the trend in international oil prices directly determines the cost center of chemical products. If market expectations of a global economic recession continue to intensify and international crude oil prices fluctuate downward, the existing cost support for PE will be directly undermined, driving down prices across all categories of polyethylene.

IV. Full-Cycle Market Summary and Market Outlook

Based on the analysis of multiple variables including overall supply and demand, policies, costs, and new production capacity, the current domestic polyethylene market is in a.Weak supply-demand balance state。

In the short term, the structural divergence in downstream segmented demand will further intensify in July: agricultural film demand is bottoming out and stabilizing, hollow packaging demand is entering its peak season for the year, while pipe demand continues to weaken under the pressure of high temperatures. Amid the tug-of-war between maintenance-related support and weak demand, prices for all PE categories are likely to remain...Low-level consolidation and bottoming outtrend.

From a phased market perspective, in the third quarter of 2026 (August-September), with the downstream autumn raw material inventory buildup starting and the concentrated implementation of special bond infrastructure projects, the PE market is expected to welcome a phased repair rebound of 200-400 yuan/ton; however, the current fundamentals do not support a trend reversal in the market.

In the medium to long term, the domestic PE industry will continue to face overcapacity. The market exit of inefficient and low-end capacity, together with enterprises’ transition toward high-end and differentiated products, will remain the core themes of the industry’s future development.

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Off-Season Demand Weighs, Polyethylene Market Expected to Fluctuate Under Pressure

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