PE Daily Review: Stronger Cost Support, Prices Mixed

1. Today’s Summary

①. A new round of talks between the US and Iran is expected to begin soon, but the market remains concerned about the fragility of the situation, with international oil prices fluctuating. NYMEX crude oil futures for June fell $1.45 to $94.40 per barrel, a decrease of -1.51% month-over-month; ICE Brent crude oil futures for June rose $0.26 to $105.33 per barrel, an increase of +0.25% month-over-month.

②、 HDPE market prices changed by -41 to +4 RMB/ton, LDPE market prices increased by +5 RMB/ton, and LLDPE market prices rose by +41 RMB/ton.

2. Overview of Spot Goods

Table 1   Domestic Polyethylene Closing Price Summary Table (Unit: RMB) (/ton)

Although the cost support is relatively firm, the pace of following up on downstream terminal demand has slowed down, weakening the rigid demand for raw material procurement, and the support from spot goods is limited. Despite the market transaction atmosphere showing some improvement today, traders and downstream players still have a resistance to high-priced goods, and high-price transactions are hindered. The market price of HDPE fluctuated between -41 and +4 RMB/ton; the market price of LDPE increased by 5 RMB/ton; the market price of LLDPE increased by 41 RMB/ton.

Figure 1 Domestic Polyethylene Market Price Trends by Type (RMB) /ton

Data source: Longzhong Information

3 Spot-Futures Basis

Figure 2   Polyethylene Basis Spread Trend (CNY) /ton)

Data source: L&F Information System

The main LL futures contract opened with a fluctuating rise, starting at 8114 yuan/ton. As of 15:00, the closing price was 8250 yuan/ton, an increase of 106 yuan/ton from the previous settlement day's settlement price. The trading volume was 554,400 lots, and the open interest was 359,800 lots. Today's basis between futures and spot was -110 yuan/ton, compared to -120 yuan/ton from the previous working day.

4 Production Dynamics

Table 2   Domestic Polyethylene Production Scheduling Ratio Table

Currently, the linear film has the highest production scheduling ratio, accounting for the largest share. 24.3%, 8.6% lower than the annual average; low-pressure pipe materials show a significant difference from the annual average, currently accounting for 7.2%, 1.8% lower than the annual average.

Diagram 3   Domestic Polyethylene Profit vs. Price Comparison (RMB) /ton)

Data Source: Longzhong Information

Oil production cost is 10203 yuan/ton; coal-to-olefins cost is 6600 yuan/ton; oil-to-olefins profit is -2053 yuan/ton; coal-to-olefins profit is 1600 yuan/ton.

5 Market Sentiment

Table 3   Domestic polyethylene industry chain practitioners' sentiment expectations

6. Price Forecast

In the short term, the cost side is still affected by the uncertainty in the Middle East, and crude oil prices are likely to remain high and strong, with a strong cost support. From the supply side, domestic enterprises still have maintenance plans, and the import resources arriving at the port are limited, so the supply pressure is not significant. Looking at the demand side, downstream demand is not smooth, and most enterprises are mainly replenishing inventory according to needs. It is expected that the polyethylene price will remain weak and fluctuate in the next week, with a range of...

7. Relevant Product Information

Crude Oil Market

8. Data Calendar

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