Polyethylene: Supply and Demand Margins Improve and Market Confidence Remains Strong, Cautious Price Increases Expected

Summary

This week, the polyethylene market prices declined, showing a weak adjustment of 80-110 yuan/ton. The polyethylene capacity utilization rate slightly increased by about 2% to 81% this week, with a slight increase in supply. As it is the beginning of the month, market spot goods gradually increased, offsetting the benefit of the low production ratio of linear films. Although downstream factories have improved their operating rates, there are few positive factors to boost the market, and the purchasing power is weak, with most buying on a need-basis at lower prices. Although there is some support from the cost side, the positive macroeconomic news has been digested, and the market lacks driving forces. The market price trend is weak, with the mainstream linear prices in North China ranging from 7,140 to 7,240 yuan/ton as of September 4th.

Recent Focus Points in the Polyethylene Market:

This week, polyethylene production reached 632,500 tons, an increase of 2.36% compared to last week. Among them, the production in the Northeast region saw a significant rise of 10.17%, while the production in the East China region experienced a notable decline of 1.14%.

This week, the sample inventory of polyethylene production enterprises in China is 450,800 tons, an increase of 23,800 tons compared to the previous period; the sample inventory in polyethylene social warehouses is 560,500 tons, a decrease of 1,500 tons compared to the previous period.

This week, the overall operating rate of various downstream industries of polyethylene is 41.06%, an increase of 0.76% compared to last week.

Polyethylene profit adjustment: oil-based profit increased by 2.62%, while coal-based profit decreased by 4.74%.

5. This week, the USD prices in the Chinese market dropped by 5-20 USD/ton. As of now, LD PE prices are in the range of 1020-1070 USD/ton, and LLDPE prices are in the range of 830-880 USD/ton.

1. At the beginning of the month, spot supply increased, and downstream sectors are observing and waiting.

Forecast: Next week, the LDPE unit at Lanzhou Petrochemical and the HDPE unit at Yangzi Petrochemical are scheduled for shutdown maintenance, while the LDPE Unit 3 at Shanghai Petrochemical is planned to start up. Imported supply arrivals are expected to decrease, leading to a slight easing of supply pressure. Downstream demand is in the seasonal improvement phase of the "Golden September," with operating rates expected to continue rising, providing strong support. With the arrival of the peak demand season, market confidence is strong. Therefore, in the short term, the polyethylene market is expected to see marginal improvements in supply and demand next week, with strong market confidence. A cautious price increase is anticipated, with the mainstream price range in North China expected to be 7,150-7,300 RMB/ton.

This week, the basis for plastics has slightly strengthened. Although there is no further boost from the news and the fundamental drivers are insufficient, industry participants have some confidence in the market outlook. As the peak demand season gradually arrives, many are holding firm on prices while selling goods. The decline in spot prices is smaller than that in futures, resulting in a slight strengthening of the basis.

Figure 1: Vinyl Polyethylene Spread Trend Chart for 2024-2025 (Unit: Yuan/Ton)

Data source: Longzhong Information

This week, domestic polyethylene production increased by 2.38%. In terms of raw material sources, polyethylene produced from light hydrocarbons saw a significant increase of 7.90%, while coal-based polyethylene production experienced a notable decrease of 3.93%. Recently, there have been considerable changes in production plant operations. Supply is expected to rise slightly next week.

Table 1 Weekly Supply and Demand Balance Sheet of Domestic Polyethylene

Unit: 10,000 tons

Data period: From last Thursday to this Wednesday

2. The decline in social sample warehouse inventory has certain support, with differentiation among various varieties.

Forecast: Next week, the inventory volume of polyethylene production enterprises in China is expected to be around 420,000 tons, with inventory levels anticipated to shift from rising to falling. The main reason is that downstream seasonal demand is gradually picking up, and operating rates are expected to accelerate. Additionally, with an increase in planned shutdown units, supply pressure is alleviated, leading to a projected decline in production enterprises' inventory.

From the perspective of social sample warehouse inventory in the next cycle, overall demand shows a growth trend. Influenced by the concentrated production of greenhouse films and the demand for packaging film products during the holiday season, terminal procurement of raw materials is likely to increase. It is forecasted that inventory will mainly experience a fluctuating decline.

This week's sample inventory of polyethylene production enterprises in China is 450,800 tons, an increase of 23,800 tons from the previous period, a month-on-month increase of 5.57%. The inventory trend has shifted from a decline to a rise. The main reason is that downstream factories are adopting a wait-and-see attitude, leading to a slowdown in purchasing efforts. Additionally, production enterprises are under less pressure at the beginning of the month, actively maintaining prices. Coupled with limited market encouragement, market transactions have slowed, resulting in a slight accumulation of inventory by production enterprises.

Figure 2 Inventory Trend Chart of Polyethylene Production Enterprises from 2023 to 2025 (Unit: 10,000 tons)

Data source: Longzhong Information

As of August 29, 2025, the social sample warehouse inventory of polyethylene stood at 560,500 tons, down 1,500 tons from the previous period, a decrease of 0.27% month-on-month and 18.57% lower year-on-year. China's polyethylene import bonded warehouse inventory decreased by 2.77% month-on-month and was 28.65% lower year-on-year. HDPE social sample warehouse inventory increased by 1.07% month-on-month but was 62.57% lower year-on-year; LLDPE social sample warehouse inventory increased by 1.20% month-on-month and was 51.59% higher year-on-year; LDPE social sample warehouse inventory decreased by 3.08% month-on-month and was 91.61% higher year-on-year. Recently, terminal demand has been gradually recovering. Demand for packaging film began to increase at the end of August, and agricultural film enterprises started receiving orders about half a month later than last year. Therefore, the current stage is the initial phase of demand growth, resulting in a slight decrease in inventory levels.

Figure 3. Polyethylene Social Warehouse Inventory Trend Chart from 2023 to 2025 (Unit: 10,000 tons)

Data source: Longzhong Information

During this period (August 29 - September 4), polyethylene production reached 632,500 tons, an increase of 2.36% compared to the previous week. Among the regions, the Northeast saw a significant increase in production, with a growth rate of 10.17%, while the East China region experienced the largest decline, with a decrease of 1.14%. In September, the number of planned maintenance shutdowns is expected to increase, resulting in significant production losses estimated at 499,600 tons, a month-on-month increase of 9.10% and a year-on-year increase of 40.84%.

Figure 4: Polyethylene Capacity Utilization Rate Trend Chart for 2023-2025

Data Source: Longzhong Information

Table 2: Weekly Production of Polyethylene in Various Regions of the Country

Unit: 10,000 tons

Data period: From last Friday to this Thursday

This week, the USD price in the Chinese market declined, with a drop ranging from 5 to 20 USD/ton. Currently, LDPE prices are at 1020-1070 USD/ton, and LLDPE prices are at 830-880 USD/ton.

Recently, there has been a significant increase in market offers, with resources coming from India, Thailand, Vietnam, the United States, Iran, and Saudi Arabia, among others. However, the price levels are relatively high, and with new domestic production capacity expected to be released in China, most importers are selective in accepting deals. Looking ahead, it is important to closely monitor transaction volumes and arrivals. Prices are expected to undergo minor adjustments.

Table 3 Comparison of Price Differences Between Imported Polyethylene and Domestic Resources (CNY/ton, USD/ton)

Table 4 Detailed Schedule of Polyethylene Imports

3. Downstream orders are in the process of gradual accumulation, and stockpiling of packaging films continues.

Forecast: Next week, the downstream operating rate is expected to increase further, with a rise of 1.43%. By product category, the operating rate in the agricultural film industry is expected to increase by 4%, the packaging film industry by 2%, the drawing (wire drawing) industry by 3%, the pipe industry is expected to remain stable, and the hollow (blow molding) industry is expected to decline by 1%. Downstream orders are gradually accumulating, with packaging film stocking continuing.

1. The supply has increased more than the demand, and the market is trading price for volume.

Explanation:

Price unit: CNY/ton

Price cycle: Weekly average price (from last Friday to this Thursday)

Product Pricing Area: Mainstream Prices in the Domestic Market

From the perspective of upstream and downstream transmission, international crude oil is fluctuating with a slight upward trend, but the driving force is limited; downstream operating rates have slightly increased, with demand modestly boosted, but restocking mainly occurs on dips; polyethylene capacity utilization is rising rapidly, the market is exchanging price for volume, prices are falling, and inventories are being reduced. Among them, HDPE prices rose by 0.26%, LDPE prices fell by 0.29%, and LLDPE prices dropped by 0.99%. Polyethylene profits are adjusting, oil-based profits increased by 2.62%, while coal-based profits decreased by 4.74%.

Figure 5 Profit Trend Chart of Polyethylene from Different Raw Materials in 2024-2025 (CNY/ton)

Source of data: Longzhong Information

The pace of order follow-up downstream is relatively slow, with a slight improvement in the trading atmosphere in some areas.

The overall operating rate of the downstream polyethylene industries this week is 41.06%, up by 0.76% compared to last week. It is expected to increase by 1.43% next week.

From the perspective of the agricultural film industry, the operating rate is 20.18%, up 2.72% from the previous period. In the greenhouse film sector, order follow-up is relatively slow. Medium and large greenhouse film enterprises have operating rates reaching 30-60%, while small and medium-sized enterprises show average operating performance. Overall, the operating rate is showing a slight upward trend. In terms of mulch film, the follow-up of garlic film orders is not as good as in the same period of previous years, and the operating rate of garlic film production enterprises is increasing at a relatively slow pace.

In the PE packaging film industry, the operating rate is 50.48%, an increase of 0.92% compared to the previous period. The market trading atmosphere has slightly improved, with some packaging product stocking starting, terminal purchasing enthusiasm increasing, and enterprises concentrating on production, primarily leading to an increase in the average operating rate.

Figure 6 Trend Chart of Operating Rates in Polyethylene Downstream Industries from 2023 to 2025

Source of data: Longzhong Information

Figure 7: Operating Rate Trend Chart for LLDPE/LDPE Downstream from 2023 to 2025

Data Source: Longzhong Information

Figure 8 Trend Chart of Operating Rates in HDPE Downstream Industries from 2023 to 2025

Data source: Longzhong Information

4. The risk of oversupply coupled with a seasonal decline in demand creates room for a potential drop in international oil prices.

Prediction: OPEC+ is expected to maintain an increase of 548,000 barrels per day in September, with a possibility of further increases in October. The peak season for traditional fuel consumption has ended, and demand is expected to weaken seasonally. Inventories may gradually shift from drawdown to accumulation. Geopolitical situations remain unstable but are unlikely to escalate for now. The Federal Reserve is likely to cut interest rates in September, resulting in a weak dollar. It is anticipated that international oil prices may have room to fall next week, with WTI expected to range between $62-65 per barrel and Brent between $65-68 per barrel. The risk of oversupply combined with seasonal demand decline suggests that international oil prices have room to decrease.

This week, the cost gap between oil-based and coal-based polyethylene narrowed by 71 yuan/ton, while the profit gap widened by 151 yuan/ton. Profits mainly increased, with only coal-based linear polyethylene profits declining by 80 yuan/ton. (Point-to-point comparison)

Figure 9 Cost Trend Chart of Polyethylene from Different Raw Material Sources in 2024-2025 (RMB/ton)

Data source: Longzhong Information

Table 5 Domestic Polyethylene Market Cost and Gross Profit Analysis Table

5. With the expectation of marginal improvement in supply and demand and strong market confidence, polyethylene is expected to cautiously increase in price.

Recent key focuses: the intensity and pace of downstream restocking, whether social inventories are being reduced, macroeconomic guidance, supply recovery, and cost support.

Table 6 Forecast of Domestic Polyethylene Market Supply and Demand Balance

Unit: Ten thousand tons

Supply: In the next 1-3 weeks, domestic polyethylene supply is expected to increase overall. The low point is 652,600 tons in the first week, and the high point is 670,900 tons in the third week. There will be significant changes in production facilities among manufacturers next week, and the new ExxonMobil Huizhou LDPE unit is expected to be commissioned this month, so supply is expected to rise gradually.

Demand: The downstream operating rate is expected to increase at a larger rate next week, with an increase of 1.43%. By category, the operating rate in the agricultural film industry is expected to rise by 4%, the packaging film industry operating rate by 2%, the wire drawing industry operating rate by 3%, the pipe industry operating rate is expected to remain stable, and the hollow industry operating rate is expected to decline by 1%. Downstream orders are in the process of gradually accumulating, and stocking for packaging films continues.

Agricultural film: The average operating rate of agricultural film enterprises has increased by about 4%. The agricultural film market has entered a reserve cycle, and enterprise orders are gradually accumulating. There is an expectation of improved production levels, which has also driven an increase in raw material demand. However, limited by the fact that the traditional peak season for agricultural film has not yet fully started, enterprises remain relatively cautious in raw material procurement. Therefore, the support from agricultural film to raw materials is relatively limited. It is expected that the operating rate of enterprises will increase in the short term.

PE Packaging Film: The average operating rate of PE packaging film enterprises has slightly increased by around 2%. Production is supported by orders in execution, with long-term orders in the fields of food composite, barrier functional films, and daily chemical packaging continuing to follow up, and stocking activities remain ongoing.

Cost aspect:

Crude Oil: OPEC+ will maintain a production increase of 548,000 barrels per day in September, with the possibility of further increases in October. The traditional peak season for fuel demand has ended, and demand is expected to weaken seasonally. Inventories may gradually shift from decline to accumulation. Although geopolitical tensions remain unstable, they are unlikely to escalate for the time being. The Federal Reserve is highly likely to cut interest rates in September, keeping the US dollar weak. It is expected that international oil prices will have room to decline next week, with WTI likely to trade in the range of $62-65 per barrel and Brent in the range of $65-68 per barrel.

Ethylene: Next week, the available spot ethylene supply for external sale in the East China region is expected to increase, but downstream purchasing willingness is limited. A price reduction by individual producers cannot be ruled out. In the USD market, inquiries for ocean freight cargo have increased, which may negatively impact the USD market within the Asian region, with prices expected to remain weakly stable.

Figure 10 Comparison of Quarterly Price Ranges for Polyethylene in 2024-2025 (CNY/ton, 10,000 tons)

Data Source: Longzhong Information

Conclusion (Short-term): Next week, LDPE units at Lanzhou Petrochemical and HDPE units at Yangzi Petrochemical are scheduled for shutdown and maintenance, while the LDPE Line 3 unit at Shanghai Petrochemical is planned to start up. Imported supply arrivals are expected to decrease, leading to a slight relief in supply pressure. Downstream demand is in the "Golden September" seasonal improvement phase, with operating rates expected to continue rising, providing strong support. As the peak demand season gradually arrives, market confidence is strong. Therefore, in the short term, the polyethylene market is expected to see an improvement in supply and demand margins next week, with strong market confidence and cautious price increases anticipated. The mainstream price range for North China pipeline is expected to be between 7,150 and 7,300 RMB/ton.

Conclusion (Medium to Long Term): In October, two full-density production lines at Guangzhou Petrochemical, the full-density line at Shanghai Petrochemical, and two lines at Maoming Petrochemical are scheduled for shutdown and major maintenance. Wanhua Chemical’s LDPE unit is planned for shutdown and minor maintenance. Units that were previously shut down for maintenance are gradually resuming operations, and there is no significant increase in imported supplies, so overall supply is expected to trend upwards. Downstream demand is expected to continue improving, with strong seasonal consumption stimulus during the “Golden October” period. Social sample warehouse inventories are also in a seasonally declining range, while the macroeconomic outlook awaits further guidance. Therefore, from a medium- to long-term perspective, the polyethylene market is expected to show a strong trend in October.

Risk Warning:

Upside Risks: 1. Downstream factories restock at low prices. 2. Inventories in social sample warehouses continue to decline. 3. More plant shutdowns lead to a greater-than-expected decrease in supply. 4. Continuous release of positive macroeconomic news provides support. 5. Cost-side support is strengthening.

Downside risks: 1. The restocking efforts by downstream factories are weaker than expected. 2. Accumulation of inventory in social sample warehouses. 3. Increased operation of production facilities, leading to greater supply pressure. 4. No data guidance from the macroeconomic side. 5. Weakened support from the cost side.