Supply and Demand Contradictions Highlighted as Polyethylene Demand Remains Supported in Peak Season

In August, the polyethylene market showed divergent performance. By product type, high-density polyethylene (HDPE) prices remained relatively firm due to supply tightening caused by the maintenance of Shenhua Xinjiang's LDPE unit. The linear polyethylene (LLDPE) market experienced range-bound fluctuations, while low-density polyethylene (LDPE) prices softened slightly.

Data Source: JLC

As of August 20th, in the East China region, the closing price for high-density polyethylene (HDPE) was between 9,580 to 9,600 RMB/ton, linear low-density polyethylene (LLDPE) was between 7,230 to 7,330 RMB/ton, low-density polyethylene (LDPE) for wire drawing was between 7,720 to 7,900 RMB/ton, LDPE for injection molding was between 7,380 to 7,600 RMB/ton, LDPE for film was between 7,450 to 7,850 RMB/ton, and LDPE for hollow products was between 7,300 to 7,450 RMB/ton.

From the supply side, the current PE production capacity is 38.29 million tons per year. As of August, the polyethylene production capacity in operation is 3.88 million tons per year, including 350,000 tons per year of high-pressure capacity, 1.23 million tons per year of linear capacity, 1.3 million tons per year of low-pressure capacity, and 1 million tons per year of full-density capacity. Among the capacities in operation, low-pressure remains the variety with the most capacity expansion, followed by linear, and lastly high-pressure. This indicates that the supply pressure for low-pressure varieties remains significant. However, in recent years, companies have tended to shift supply conflicts by focusing more on producing high-end and high value-added products.

Data source: JLC Network Technology

From the demand side, the demand for greenhouse film is slowly progressing, with medium-level enterprise operation. The demand for mulch film is gradually starting, and operations are slowly increasing. Overall demand is expected to improve, and there is still support at the market bottom. However, the enthusiasm of end-users to purchase is generally moderate, with transactions predominantly maintaining just the necessary demand.

From a macro perspective, on the afternoon of the 20th, news surfaced that China will address the issue of excess petrochemical production capacity through major overhauls. This plan is currently awaiting final approval from the Ministry of Industry and Information Technology. As soon as this news was released, market speculation sentiment increased, linear futures stopped falling and rebounded, merchants' confidence improved, and afternoon quotations slightly adjusted. However, the trading atmosphere remained subdued.

Overall, the supply and demand imbalance of polyethylene has yet to ease, but the upcoming "Golden September and Silver October" peak demand season may provide support to the market. In the short term, prices are expected to remain range-bound with limited downside.