Plastic Processing Industry Profits Remain Flat As Polyolefins Struggle In Competitive Market

In July 2025, the National Bureau of Statistics released the national Producer Price Index (PPI) data, showing a month-on-month decrease of 0.2% and a year-on-year decrease of 3.6%, with the rate of decline remaining unchanged from June. The price of producer goods fell by 4.3%, leading to an overall decrease of approximately 3.20 percentage points in the producer price index. Specifically, prices in the mining industry decreased by 14.0%, the raw materials industry by 5.4%, and the processing industry by 3.1%.

In terms of the PPI sub-sectors, the price decline of plastic products in July was consistent with the rate of change in synthetic material prices compared to June. The positive difference between the two maintained stability, reflecting that the profitability of the plastic processing industry remained the same as in June. In June, influenced by the mutual military strikes between Israel and Iran, the price of polyolefins first rose and then fell, with the overall price focus moving upwards. In July, due to the macroeconomic impact of "anti-involution," prices fluctuated upwards, but after facing resistance at the June peak, they retreated. In August, there are no obvious favorable signals yet, and it is expected to experience weak fluctuations, testing the bottom formed in July.

High temperatures and rainy weather in summer contribute to the decline of domestic PPI.

In July, the Producer Price Index (PPI) decreased by 3.6% year-on-year, with the rate of decline remaining unchanged from June; the PPI fell by 0.2% month-on-month, with the rate of decline narrowing by 0.2 percentage points compared to the previous month—marking the first narrowing of the month-on-month decline since March. The main reasons for the month-on-month change in PPI this month are as follows: First, seasonal factors combined with uncertainties in the international trade environment led to price declines in certain industries. Increased high temperatures and rainfall in summer have slowed the progress of construction projects, affecting demand for building materials; meanwhile, abundant river water in some regions has significantly enhanced the supplementary and substitutive role of hydropower for thermal power, reducing demand for thermal coal and lowering electricity prices. As a result, the prices in the non-metallic mineral products industry fell by 1.4% month-on-month, the prices in the ferrous metal smelting and rolling processing industry dropped by 0.3%; prices in the coal mining and washing industry decreased by 1.5%, and prices in the power and heat production and supply industry fell by 0.9%. Under the influence of international trade environment uncertainties, prices in the computer, communications, and other electronic equipment manufacturing industry declined by 0.4%, prices in the automobile manufacturing industry dropped by 0.3%, prices in the electrical machinery and equipment manufacturing industry decreased by 0.2%, and prices in the general equipment manufacturing industry fell by 0.2%.

The aforementioned eight industries collectively contributed to a month-on-month decrease of approximately 0.24 percentage points in the PPI. Secondly, the continuous optimization of domestic market competition order has led to a narrowing of price declines in related industries. As the construction of a unified national market advances in depth, the market competition order in industries such as coal, steel, photovoltaic, cement, and lithium batteries continues to improve. The month-on-month price decline for coal mining and dressing, ferrous metal smelting and rolling processing, photovoltaic equipment and component manufacturing, cement manufacturing, and lithium-ion battery manufacturing narrowed by 1.9, 1.5, 0.8, 0.3, and 0.1 percentage points, respectively, compared to the previous month. Collectively, their downward impact on the PPI month-on-month decrease was reduced by 0.14 percentage points compared to the previous month. Additionally, international input factors drove up prices in the domestic petroleum and non-ferrous metal-related industries, with petroleum and natural gas extraction prices rising by 3.0% and non-ferrous metal smelting and rolling processing prices rising by 0.8%. On a year-on-year basis, macroeconomic policies continued to exert force and were timely strengthened, leading to improvements in the supply-demand relationships in some industries, resulting in positive price changes. Firstly, industrial transformation and upgrading have led to a year-on-year price increase in related industries. The transformation and upgrading of traditional industries and the governance of key industry capacities are gradually advancing, while emerging industries are rapidly growing and expanding, resulting in a year-on-year price increase in related industries. Secondly, the continuous release of domestic demand potential has driven year-on-year price increases in some industries. The deep implementation of actions to boost consumption, along with the sustained healthy development of the consumer market, and the increase in demand for upgraded consumption have driven year-on-year price increases in some industries.

The rate of decrease in raw material prices is consistent with the rate of decrease in processing industry prices.

In July, the processing industry prices decreased by 3.1% year-on-year, with the decline narrowing by 0.1 percentage points compared to June; the raw materials industry prices decreased by 5.4% year-on-year, with the decline also narrowing by 0.1 percentage points compared to June. Since the price changes of the raw materials industry and the processing industry were the same, both narrowing by 0.1 percentage points simultaneously, the difference between the two, representing the processing industry profit, remained at 2.3 (2.3 in June).

Data source: National Bureau of Statistics, JLC Direct

As shown in the figure, profits in the processing industry are generally inversely related to the prices of raw material industries and processing industries. The price trends of the processing industry and the raw material industry are basically consistent, and the cause of fluctuation in processing industry profits is that raw material prices fluctuate more sharply. In January 2025, processing industry profits remained negative and further declined. Clearly, this was due to slow marginal increases in downstream prices, while marginal increases in raw material prices were relatively rapid. In February, the marginal decline in raw material prices expanded, leading to an improvement in processing industry profits. In March, the decline in raw material prices continued to expand, and processing industry profits continued to improve. In April and May, processing industry profits also continued to improve, while in June and July, they remained stable.

The rate of decline in upstream and downstream prices is consistent, and the profit of plastic products remains unchanged from the previous month.

In July, the prices of the chemical raw materials and chemical products manufacturing industry decreased by 6.5% year-on-year, with the decline expanding by 0.4 percentage points compared to June; the prices of rubber and plastic products decreased by 2.5% year-on-year, with the decline expanding by 0.3 percentage points compared to June; the prices of synthetic materials decreased by 10.1% year-on-year, expanding by 0.5 percentage points compared to June; and the prices of plastic products decreased by 3% year-on-year, with the decline expanding by 0.5 percentage points compared to June. As shown in the figure, due to the identical changes in the growth rates of synthetic material prices and plastic product prices, the profits of the plastic products industry in July remained the same as in June.

Data source: National Bureau of Statistics, JLC Network Technology Co., Ltd.

From the price trends of plastic products and synthetic materials, after the profit of plastic products continues to improve and reaches a certain peak, the price of synthetic materials at a low level will begin to rebound, and the rebound will be faster than that of plastic products, leading to a decline in the profit margin of plastic products. After the profit of plastic products improved in March, it continued to improve in April and May, mainly because the price of synthetic materials fell even more.

Where are polyolefin prices headed under the profit cycle of plastic products?

The transfer of product profits along the industrial chain is accompanied by price changes between raw materials and finished products, forming a profit cycle. From the price trends of finished products and raw materials, the profits of plastic products increase as raw material prices fall. When the profits of plastic products are sufficiently high, production activity will rise, stimulating effective demand, thereby driving raw material prices higher. This is a process of mutual competition between the two sides. However, macroeconomic factors are increasingly becoming critical and play a decisive role in certain stages. In April 2025, the price of polyolefin futures was affected by Trump's "reciprocal tariffs" policy, resulting in a gap down opening followed by a continuous decline. Subsequently, the meeting statement on May 12 brought positive news that triggered a technical rebound, but in May the market still returned to fundamentals and continued to decline, hitting a new low for the year. The trade policy game between China and the United States cannot return to the starting point overnight. Under the influence of macroeconomic and fundamental factors, the competition intensifies. From a weak fundamental perspective, it is expected that the polyolefin market will continue to test the bottom formed earlier within a range-bound fluctuation.