[PE Daily Review] Buying Sentiment Softens, Market Still Seeks Low-Priced Deals

1 Today’s summary

1. Iran warned vessels not to use unauthorized routes through the strait, heightening market concerns over growing instability and pushing international oil prices higher. NYMEX crude oil futures for the August contract rose by USD 1.58/barrel to USD 71.92/barrel, up 2.25% month-on-month; ICE Brent futures for the August contract rose by USD 1.52/barrel to USD 75.26/barrel, up 2.06% month-on-month.

② The HDPE market price change ranged from -501 to -98 yuan/ton, the LDPE market price changed by -185 yuan/ton, and the LLDPE market price changed by -163 yuan/ton.

2 Spot Market Overview

Table 1 Summary of Domestic Polyethylene Closing Prices (Unit: yuan/ton)

Today, domestic polyethylene spot market prices continued to decline, with decreases ranging from RMB 200 to 400 per ton. Although support from the cost side has strengthened, there is still some pressure from market fundamentals. Most market participants have maintained an active pace of shipments, with prices continuing to offer concessions, while trading volume has remained difficult to expand significantly. Today’s transaction assessment stood at 28.13%, up 8.39% from yesterday. HDPE The market price change range is -501 to -98 RMB/ton, the LDPE market price is -185 RMB/ton, and the LLDPE market price is -163 RMB/ton.

3 Spot-Futures Basis

LL The main contract fluctuated downward, opening at 6,870 yuan/ton and closing at 6,852 yuan/ton at 15:00, down 19 yuan/ton from the previous settlement price. Trading volume was 538,100 lots, and open interest was 420,600 lots. The spot-futures basis was 98 yuan/ton today, down 184 yuan/ton from the previous working day.

4 Production Dynamics

Table 2Domestic Polyethylene Production Schedule Ratio Table

Currently, the production ratio of linear films is the highest, accounting for 27.9%, which is 2.4% higher than the annual average level. The low-pressure films show a significant difference from the annual average data, currently accounting for 10.6%, which is 1.4% lower than the annual average level.

Oil-based production cost: 7,882 yuan/ton; coal-based production cost: 7,125 yuan/ton; oil-based profit: -712 yuan/ton; coal-based profit: -25 yuan/ton.

5 Market sentiment

Table 3: Sentiment Expectations of Upstream and Downstream Participants in China’s Polyethylene Industry

6 Price Prediction

In the short term, the supply side is seeing a concentrated resumption of maintenance facilities, coupled with new production capacities about to enter the market, leading to an ample supply of goods and persistent supply pressure. On the demand side, it is the off-season for agricultural films, and orders from packaging end-users are sluggish. Against the backdrop of continuously weakening prices, transactions are cautious. The demand from overseas Southeast Asia and South Asia is weakening, resulting in limited export support. With the supply-demand imbalance, market bearish sentiment is strong, with only crude oil providing weak bottom support. It is expected that the overall price of polyethylene will fluctuate weakly next week. (This is a personal opinion for reference only.)

7 Relevant product information

Crude Oil Market: In the short term, the main trading logic in the international crude oil market has not changed. Bullish factors come from the fact that several Middle Eastern oil-producing countries will need time to restore crude oil production, while bearish factors include the easing of U.S.-Iran tensions, the gradual resumption of normal navigation through the Strait of Hormuz, weak demand, and stronger expectations of Fed rate hikes. Although vessels have been attacked in the Strait of Hormuz, plans for new U.S.-Iran talks at the end of the month remain unchanged, and the new peace-talk process is still moving forward. International oil prices are expected to have room to fall tomorrow.

8 Data Calendar

Table 4 Overview of Domestic Polyethylene Data (Unit: 10,000 tons)