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Polyolefin "Opening Red" Why Was It Just a Fleeting Moment

Plastmatch Insights Lab 2026-02-25 14:00:16

On February 24—the first trading day following the Spring Festival holiday—the polyolefin market delivered the long-awaited “opening red”: the main PP contract closed up 2.71%, and the main PE contract closed up 2.65%, with the red gains creating a sense of spring in the market. However, this exuberant sentiment has today shown signs of fatigue, and the upward momentum has abruptly halted.

We believe the reasons mainly lie in two aspects.

I. Geopolitical Premium and Trump's "Smoke Screen"

The high opening and strong performance of polyolefin futures yesterday was largely due to the "strong support" from international crude oil during the long holiday. Affected by the tensions between the US and Iran, Brent crude oil once broke through the $72 mark, providing significant cost support to downstream chemical products.

However, geopolitical scripts often change in the blink of an eye. Although the Trump administration maintained an extremely tough rhetorical stance toward Iran—even issuing a military “15-day red line” warning—its core intent did not appear to be igniting actual warfare, but rather pressuring Iran back to the negotiating table through high-pressure tactics. With news emerging of an upcoming third round of negotiations, market nerves began to ease.

Crude oil prices showed a notable premium decline today. For polyolefins, the "pulse-like" increase in the cost side loses its sustainability, and the logic of the futures market's backwardation repair thus loses its foundation. When the oil turns into a "false move," the gain in polyolefins naturally shrinks.

Inventory is high, and the supply and demand contradiction continues.

If crude oil is an external disturbance, then the supply and demand contradiction is an internal "chronic illness" of polyolefins.

After a nine-day extended holiday, domestic petrochemical inventories have surged as expected. Preliminary statistics show that petrochemical inventories post-holiday have soared to a historic high of over one million tons, creating immense pressure to deplete stock. In sharp contrast, downstream factories’ resumption of operations has been somewhat sluggish. Affected by the workers’ return-to-work cycle and the time required for post-holiday orders to materialize, end-user demand has not yet delivered a strong response.

The most obvious signal is this: while futures surged by more than 2.5% yesterday in a rally, the spot market remained remarkably calm. Spot prices for polyolefins in major regions were generally raised by only 0–50 RMB/ton, causing the basis to widen rapidly. The spot market's inability to follow the rally reflects traders' concerns about future destocking pressures and end-users' resistance to high-priced material.

Conclusion:

In the short term, geopolitical games will continue to cause uncertain, pulse-like fluctuations in costs, and polyolefin prices are likely to remain in a wide-ranging oscillation.

But looking at a longer time horizon, the market will eventually return to the main logic of "inventory digestion." With hundreds of thousands of tons of inventory yet to be effectively cleared and the quality of the demand side still to be verified, polyolefins lack the fundamental support for a sustained upward trend.

Author: Zhou Yongle, Senior Market Analyst

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Polyolefin "Opening Red" Why Was It Just a Fleeting Moment

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