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SunSirs: PE Market Fluctuated Down on February As Slow Recovery of Downstream
March 04 2020 10:25:17SunSirs(Daisy)

In February, the overall trend of the three major domestic PE market shows a downward trend. The curve of LLDPE and LDPE in east China has been twists and turns, and the curve of HDPE rebounded after falling.

LLDPE 7042 dropped to 6816.67 RMB/ton at the end of month. LDPE 2426H decrease to 7562.5 RMB/ton at the end of the month. In addition, HDPE 5000S at the end of the month is to 7383.33 RMB/ton. The drop ranges from 500 to 600 RMB/ton. 

February PE marke’s overall center of price moved down. This month's linear futures volatility fell. Although there is a rebound in the second half of the overall still weak, the spot market is limited. International crude oil was also heavily affected by public health events, falling in a row, especially WTI crude oil has fallen to a one-year low. 

At the beginning of this month, the spot market under the influence of the epidemic. The Spring Festival holiday is extended, the downstream resumption of work is relatively slow, and the market trading atmosphere is light. 

Petrochemical company inventory has a substantial accumulation, only with a small decline in the middle of month. The petrochemical inventory has been maintained at a relatively high level, sales pressure. In the middle of the month, as the epidemic eased, a small part of the downstream resumed work successively. The transportation also eased, and the market demand increased compared with the previous period. The enterprise inventory fell slightly, and the spot price rebounded. However, since then, the crude oil declined significantly, the futures fell in shock, and the downstream did not fully recover, so the market demand was limited. With the completion of phased replenishment, more delighting consumed the inventory, and the market transaction atmosphere became weak again. In the attitude of merchants, the offer was eased. Among them, LLDPE and LDPE has a slight decrease after rebounding, while HDPE is weakly sideways. 

Crude Oil: By the end of the month (February 26), the international crude oil market atmosphere will full of panic as the outbreak of COVID-19 two days before. After China outbreak, many institutions have reduced the global oil demand growth forecast by 2020. That is generally at the beginning of the year more than 1.2 million barrels by 300000 barrels per day. 

Meanwhile, in Japan, South Korea, Italy, Iran and global spread, after again after agencies downgraded growth expectations, Goldman Sachs has on Wednesday will reduce the demand from 1.2 million barrels of crude oil to the amount of 600000 barrels per day. It can be seen that pessimistic expectations on the formation of oil prices more serious unprecedented pressure. SunSirs believes that the recent crude oil would remain low, and the market risk factors of stack will lead to amplitude increase of crude oil. The market's ultra-reaction also makes further increased risk of bull. The recent market will be in low volatility and does not exclude the possibility to continue to dip. However, along with further digestion of COVID-19 and the stimulation of supply risk, there will be a rebound of crude oil demand.

Ethylene: Ethylene at the end of the month as a whole showed a downward trend. Ethylene prices were stable in Asia, ending at $703- $709 a ton in CFR northeast Asia and $696-$704 a ton in CFR southeast Asia as of 27th. The price of ethylene in the European market declined slightly. As of 27th, the price of ethylene in the European market closed at us $886-us $895 / ton for FD in northwest Europe, while that of CIF Europe closed at us $782-790 / ton. The price of ethylene in the United States has fallen. Up to 27th, the price is $273-291 / ton. Overall, recently, the ethylene market in Europe and the United States continues to decline, especially the lowest price of ethylene in the United States.

Futures: This month even plastic main contract at the beginning of 2005 opened at 6,740 RMB/ton, closing at 6,725 RMB/ton on the 28th, highest at 7,045 RMB/ton, lowest to 6,500 RMB/ton, monthly decline in 6.01%. Trading volume to about 2.947 million hands, holding volume to 297 million hands, showing the overall downward trend. 

Imports and Exports: There is 1.5263 million tons of PE imports in December 2019. The import volume of LLDPE is 482,400 tons, HDPE is 737,900 tons, LDPE is 306,000 tons, and the total export volume of PE in December 2019 is 26,400 tons.

Market Forecasting: The current trend of linear futures and international crude oil is weak, to some extent to depress confidence. Petrochemical inventory is high, and the market transaction atmosphere is weak. The sales pressure is greater, and the market cost support strength is weakened. Meanwhile, the downstream resumption of work is slow, with limited market demand. Part of the main procurement is exactly based on demand. In March, with the recovery of transportation, downstream enterprises resumed production one after another. But the overall market is relatively pessimistic, and the increase in demand is limited. Market supply and demand contradictions still exist. In the short term, there will be no significant improvement. The PE spot market is expected to continue to be weak.

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