Leading article: In 2024, capacity expansions were concentrated in the North China region, accounting for 64% of the national total. The main areas of expansion were in Shandong Province. In 2025, Shandong will see another 1.4 million tons of new capacity coming online. With ongoing production from new facilities and additional resources flowing into Shandong after capacity expansions in Northwest China, competition within the region has intensified significantly. As a result, prices in Shandong have become the lowest in the country.

The North China region continues to expand capacity, and the increase in output is significant.

2020 In North China, the total polyethylene capacity was 2.69 million tons. By 2020, with continuous commissioning of private enterprises, the polyethylene capacity in the region continued to expand, reaching 5.94 million tons by 2024. The capacity additions in North China were mainly concentrated in Shandong Province. In 2024, the 1.3 million-ton unit of Yulong Petrochemical commenced operation, bringing Shandong's polyethylene capacity to 3.9 million tons, accounting for 66% of the total capacity in North China.

The continuous commissioning of new facilities is steadily increasing production capacity, with a notable rise in output in the North China region by 2025. In the first quarter, polyethylene production is projected to reach 1.1875 million tons, marking a 38.03% increase from the fourth quarter and a 67.28% year-on-year growth compared to the same period last year. The significant production surge has substantially heightened supply pressure.

Shandong is the main consumption area, where the demand for agricultural film is concentrated.

ChinaThe northern region is the main consumption area for polyethylene products in China, with Shandong and Hebei provinces being the primary centers of consumption. Shandong's consumption accounts for over 50% of the total consumption in the North China region. Due to insufficient production capacity of polyethylene facilities in the region, North China remains a resource-importing area, with external resources mainly supplemented by allocations from Northwest and Northeast China as well as imported resources.

From the demand side, the downstream industries of polyethylene in the North China region mainly include agricultural films, pipes, and packaging. There is a high demand for linear films, pipe materials, high-pressure films, and low-pressure films. Films are primarily used in the agricultural film and packaging film industries. Shandong Province is an agricultural hub, especially in cities such as Zibo, Linyi, Qingzhou, Liaocheng, Jining, and Shouguang, where there is a concentrated demand for agricultural films. Packaging films are mainly concentrated in areas like Weifang Changle and Rizhao Ju County.

Coal production costs are lower, making it difficult to phase out in the North China region in the short term.

From a process perspective, coal-to-chemicals production costs are relatively low, with optimistic profit margins, and the price advantage over petrochemicals is evident. The North China region is a concentrated area of demand, with significant demand for agricultural and packaging films in Shandong. Although production capacity in this region continues to increase, a substantial number of facilities are still being commissioned in the Northwest region, such as the 1.65 million-ton facility of Baofeng in Inner Mongolia. Resources from the Northwest will continue to supplement the demand gap in North China. However, the cost advantages of coal-to-chemicals enterprises are significant, making it difficult to replace North China in the short term.

Shandong is severely affected by internal competition, with prices becoming a national low point.

Due to the concentrated production launch in the North China region in 2024, especially after the startup of Yulong Petrochemical, the supply increment in the region is significant. As a "giant" in Shandong Province, Yulong Petrochemical not only needs to meet the demand in this region but also, when the price difference is appropriate, will flow into the East China and South China regions. The price trend shows that the price differences between regions have noticeably narrowed, leading to more intense price competition. If the price difference is not suitable for circulation, it can only be consumed within this region. In 2025, Shandong will still see the commissioning of 1.4 million tons of new capacity, coupled with the full commissioning of 1.65 million tons from three production lines in Baofeng, Inner Mongolia in the Northwest. Under the dual pressure of regional capacity expansion and external resource inflow, Shandong is facing significant supply pressure, and competition among enterprises is severe, making prices the lowest in the country. As of March 27, the price range for linear materials in Shandong has fluctuated between 7,750 and 7,900 yuan/ton.