Market Analysis

Prices and basis: The closing price of L main contract was 7,693 yuan/ton (-42), the closing price of PP main contract was 7,314 yuan/ton (-22), the LL North China spot was 7,840 yuan/ton (-10), the LL East China spot was 7,900 yuan/ton (50), the PP East China spot was 7,330 yuan/ton (-20), the LL North China basis was 147 yuan/ton (32), the LL East China basis was 207 yuan/ton (92), and the PP East China basis was 16 yuan/ton (2).

In terms of upstream supply, the operating rate of PE is 80.7% (-3.9%), and the operating rate of PP is 77.0% (-5.1%).

In terms of production profits, the profit from PE oil-based production is 394.1 RMB/ton (-66.2), the profit from PP oil-based production is -345.9 RMB/ton (-66.2), and the profit from PDH-based PP production is -49.4 RMB/ton (8.7).

In terms of imports and exports, the import profit for LL is -377.1 yuan/ton (-1.2), the import profit for PP is -266.4 yuan/ton (-1.1), and the export profit for PP is 65.8 USD/ton (0.1).

In terms of downstream demand, the operating rate of PE downstream agricultural film is 40.4% (up 1.1%), the operating rate of PE downstream packaging film is 45.4% (up 3.7%), the operating rate of PP downstream woven bags is 47.4% (up 0.9%), and the operating rate of PP downstream BOPP film is 61.5% (no change).

The upstream petrochemical plants are entering the spring maintenance period, with many polyethylene production facilities undergoing shutdowns. Inner Mongolia Baofeng's No. 3 line has yet to produce qualified products, causing a delay in its startup. Shandong New Era and Huizhou ExxonMobil have plans for gradual startups of new facilities, which will continue to exert pressure on future supply. Crude oil prices have rebounded, leading to a decline in PDH-based polypropylene profits, but overall cost support remains acceptable. The downstream agricultural film sector is in its peak production season, with an increase in order volume; however, the operating rate for agricultural film is expected to reach a high point, resulting in limited new orders for the overall factories and weak demand for restocking. The destocking of upstream and social inventories is progressing slowly.

Strategy

Bullish on plastic with caution, leaning towards a bearish outlook.

No carry trade:

Risk

Geopolitical influences, fluctuations in crude oil prices, and the recovery of downstream demand.