"Golden September" Fails to Arrive as Expected: Can Polyethylene Market Rebound Later?

Since the beginning of September, most downstream polyethylene product industries in China have entered the peak consumption season. However, judging from the price trend at the beginning of the month, market prices have not risen as expected. On the contrary, some varieties have experienced a certain degree of decline.

1. Supply pressure is relatively high, demand is below expectations, and recent prices are weak and volatile.

In September, China's downstream polyethylene products industry enters the traditional peak consumption season. However, judging from the market trends at the beginning of the month, this year's performance has differed from previous years. In early September, the market did not see the expected price increase; instead, prices declined to a certain extent. For example, the average price of LLDPE film, a benchmark product, was 7,425 yuan/ton in the first week of September, down 37.2 yuan/ton from the last week of August, a week-on-week decrease of 0.5% and a year-on-year decrease of 10.59%.

The main reason for the price decrease instead of increase this time is primarily due to the prominent supply-demand imbalance. Firstly, on the supply side, in the first week of September, China's polyethylene production reached 632,500 tons, an increase of 14,600 tons compared to the previous week, with a growth rate of 2.36%. From the end of August to early September, many domestic facilities that had previously been shut down for maintenance gradually resumed operations, leading to a temporary increase in supply, impacting market trends. With the increase in production facilities, the utilization rate of domestic polyethylene capacity also rose. In the first week of September, China's polyethylene capacity utilization rate was 80.55%, an increase of 1.87 percentage points compared to the previous period.

Secondly, turning to the demand side, according to a survey by Longzhong Information, in the first week of September, the operating rate of downstream polyethylene was 41.06%, an increase of 0.76 percentage points from the previous week, but a decrease of 1.41% compared to the same period last year. By product type, except for the downstream filament products, which saw a decline in factory operations due to the opening of the sea and the end of summer, other product industries showed varying degrees of increase in operating rates, although all were lower compared to the same period last year. This has had a certain bearish impact on recent polyethylene prices in China.

2. Demand continues to rise, maintenance of facilities increases, creating an opportunity for polyethylene market to rise.

Although the operating rate of the downstream polyethylene products industry has been increasing slowly this year, it still shows a steady upward trend. Due to the impact of the peak consumption season, the operating rate of the agricultural film industry is expected to rise to about 40% in September. The operating rates of the pipe products and packaging film products industries will also increase to varying degrees. As the operating rates of downstream products rise, the demand for polyethylene raw materials is expected to increase, which will in turn support market prices.

In addition to the support from demand, the supply side will also provide significant support in the future. In September, although the major overhauls of the National Energy Xinjiang LDPE unit and the Jinhai Chemical HDPE unit were completed and gradually resumed operations, many companies still plan to shut down their polyethylene units this month. According to statistics from JLC Consultancy, polyethylene shutdown losses in China in September will reach a new high for the year, expected to reach 561,000 tons, an increase of 103,100 tons compared to August, a rise of 22.52%. As maintenance loss increases, market supply pressure will be reduced, which will help prices rise.

In addition to the positive factors in the fundamentals, macroeconomic policies are also expected to have a favorable impact. According to U.S. media reports, the probability of the Federal Reserve cutting interest rates by 25 basis points in September is 93%. The probability of a cumulative 25 basis points rate cut in October is 21.4%, while the probability of a cumulative 50 basis points cut is 73.2%. Domestically, policies such as "anti-involution" and "capacity adjustment" are also being gradually implemented. The implementation of these various macro policies has also influenced market sentiment among participants. In summary, from mid-September to October, China...Polyethylene MarketThe market will be influenced by multiple factors and has the potential to rise, with the mainstream price of standard products expected to reach 7,600-7,800 RMB/ton.