[PE Daily Review] Weak Demand Persists, Polyethylene Center Of Gravity Moves Lower

1 Today’s summary

U.S.-Iran negotiations have stalled, heightening market concerns over supply risks and pushing international oil prices higher. NYMEX crude oil futures for the July contract settled at USD 93.76 per barrel, up USD 1.60 per barrel, or +1.74% from the previous period; ICE Brent crude oil futures for the August contract settled at USD 96.00 per barrel, up USD 1.02 per barrel, or +1.07% from the previous period.

② The HDPE market price change ranged from -53 to -9 yuan/ton, the LDPE market price changed by -104 yuan/ton, and the LLDPE market price changed by -7 yuan/ton.

2 Spot Market Overview

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

Domestic polyethylene market prices fell today. Although crude oil prices showed an upward trend due to the geopolitical situation in the Middle East, market sentiment remained weak. Except for a slight increase in standard-grade prices influenced by futures, prices of other grades declined due to insufficient demand. HDPE market prices changed by -53 to -9 RMB/ton, LDPE market prices fell by 104 RMB/ton, and LLDPE market prices fell by 7 RMB/ton.

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

Data source: Longzhong Information

3 Spot-futures basis

Figure 2 Polyethylene Basis Trend (yuan/ton)

Source: Longzhong Information

LL The main contract opened with volatile weakness, opening at 7,958 yuan/ton. As of 15:00, it closed at 7,937 yuan/ton, down 2 yuan/ton from the previous settlement price. Trading volume was 586,700 lots, and open interest was 369,100 lots. The spot-futures basis was 95 yuan/ton today, down 38 yuan/ton from the previous business day.

4 , Production Updates

Table 2Domestic Polyethylene Production Planning Ratio Table

Currently, linear film scheduling has the highest proportion, accounting for 26.5%, which is 4.4% lower than the annual average. Low-pressure hollow film shows a significant difference from the annual average, currently accounting for 11.7%, which is 2.5% lower than the annual average.

Figure 3 Comparison of Domestic Polyethylene Profit and Price (Yuan/Ton)

Data source: Longzhong Information

The oil-based production cost is 9,417 yuan/ton; the coal-based production cost is 6,938 yuan/ton; the oil-based profit is -1,247 yuan/ton; and the coal-based profit is 1,276 yuan/ton.

5 Market Sentiment

Table 3 Sentiment Expectations of Domestic Polyethylene Upstream and Downstream Market Participants

6 Price Prediction

In the short term, although tensions in the Middle East have led to a rebound in crude oil prices, the impact on domestic polyethylene fundamentals is limited. Insufficient follow-up from buyers has hindered suppliers’ shipments, while price cuts by producers have further weighed on market sentiment. It is expected that China’s polyethylene market prices will continue to trend weaker tomorrow, with declines likely to be around RMB 100/ton. (Personal opinion, for reference only)

7 Related product information

Crude Oil Market: In the short term, the main trading logic of the international crude oil market remains unchanged. Positive factors include significant production cuts imposed on several oil-producing countries in the Middle East, and the navigation through the Strait of Hormuz has not fully improved. Negative factors include the ongoing ceasefire between the U.S. and Iran, lower operating rates at refineries in many Asian countries, and increased expectations of interest rate hikes by the Federal Reserve. Currently, there are reports that the final peace agreement text from Iran is still under discussion and has not been communicated with the U.S. side, while recent tensions between the two sides have escalated, raising concerns over supply risks. It is expected that there is room for an increase in international oil prices tomorrow.

8 Data Calendar

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