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SunSirs:Rubber And Plastics, 2019 PE Yearly Report

December 27 2019 09:28:27     SunSirs (Daisy)

1. Overall Trend

In 2019, the PE market trend showed a downward and shocking trend. Among them, LLDPE fell by 20.54% throughout the year, HDPE fell by 19.9%, and LDPE fell by 11.76%.

The reason for the market decline is that on the one hand, the supply and demand conditions and terminal procurement are weak.

On the other hand, the trade environment is complex and changeable, which has a greater impact on the domestic spot market.

In addition, the demand for polyethylene terminals in 2019 is less elasticity. Most of them are rigid needs. However, the capacity of new domestic and foreign polyethylene investment equipment in 2019 will exceed 8 million tons per year.

The total output of plastic products in January-August 2019 was 60.669 million tons, a 8.1% year-on-year increase.

Various factors contributed to the ups and downs of the polyethylene market. Let's look at it specifically:

2. Market analysis

In the first quarter, the PE market generally declined.

January is approaching the Spring Festival holiday. The lack of demand expectations leads to a cautious attitude of the industry. Most people wait and see.

As the Spring Festival holiday approaches, downstream factories gradually enter the holiday season. Demand expectations are insufficient, and downstream enthusiasm for entering the market is weakened. Spot market is pessimistic.

After the holiday, production was resumed downstream and the operating rate increased. Some players reenter the market and begin to purchase goods.

However, Sinopec's inventory has accumulated more than 1.1 million tons. Sinopec's efforts to reduce its inventory have increased. The terminal has a cautious attitude. And the enthusiasm for entering the market has obviously weakened. And the contradiction between supply and demand has increased.

However, supported by the easing of the China-US trade war, tensions in the Middle East, and OPEC production cuts, crude oil emerged from a wave of rising prices. WTI and Brent continued to rise. Crude oil has played a supporting role in the polyethylene market. The PE market was steadily lowered.

In the second quarter, the PE market fluctuated and fell.

At the beginning of the season, the overall market rebounded slightly.

There are some reasons. Downstream agricultural film and mulch demand is in peak season in the first quarter. The crude oil price increases at the beginning of the month. Some manufacturers were in the state of maintenance, which favored the surrounding market, and Petrochemical's price mentality was obvious.

Under the influence of the tax reduction policy, the market was also positive. The trading atmosphere was more positive, and prices rebounded slightly.

But the good times did not last long, and then the market fell.

After entering the second quarter, as the demand for agricultural film and mulch film gradually decreased, the downstream demand for PE to support the price began to weaken.

Affected by the various aspects of the China-US trade war, plastic futures have begun to dive, affecting the market mentality.

In addition, the continuous flow of imported goods has led to continuous price reductions by all parties.

The middlemen and downstream are affected by the poor economic environment and demand, and they often purchase on demand and operate at low positions.

As a result, the decline in PE's social inventory has been slow and has remained at a historically high level. Some petrochemicals canceled the mark-up sales and lowered the ex-factory prices.

Although crude oil and futures have risen sharply at the end of the month, and merchants are testing high reports, the terminal still maintains replenishment and downstream demand is not good.

With sufficient supplies and high social inventory, suppliers can only gradually reduce sales prices. High price transactions are more difficult. PE prices continued to weaken.

In the third quarter, due to the arrival of the traditional stocking period, it should have been the peak season for the plastic market. However due to multiple negative effects, the peak season effect was not obvious.

Many downstream operating modes have changed, and manufacturers' procurement is more rational.

In the beginning of the quarter, the future rebounded after falling and continued to rise. In addition, the crude oil rose sharply, which boosted the spot market and rose slightly. However, the good time did not last long, and the PE spot market fell again in mid-July.

Futures Masukura continued to fluctuate downward and fell below the 8000 mark. The mentality of suppressing the market is obvious, and the wait-and-see atmosphere of downstream companies has increased, and their enthusiasm for entering the market has declined.

Futures continued to decline. Market trading was weak. Distributors' shipping pressure increased. There are few market transactions.  

Petrochemical companies' inventory has gradually accumulated, and ex-factory prices have been reduced successively. The market cost side lost support and prices continued to fall. Although the petrochemical inventory declined in the later period, it was slow.

Traders were pessimistic, and reported the price closely dependent on market condition. They mainly focus on selling product rather than procuring goods.

Downstream companies have a weak intention to receive goods. They mainly purchase based on demand. They operate with low inventory, and the overall trading atmosphere in the spot market continues to be light.

The market did not stop falling until mid-September. Due to the bottoming out of the futures, the industry has a bullish attitude towards the market outlook.

Petrochemical companies entered a rapid destocking cycle, and the ex-factory price continued to rise. This is evident in LDPE. LLDPE rose significantly in the third quarter, reaching 4.9%.

In the fourth quarter, the polyethylene market lacked obvious positives, and the market performance continued to be weak.

Although the beginning of the season is still in the "Silver October" peak season, downstream orders are not as good as in previous years, and the price of raw materials is more bearish. Most of companies procure exact based on demand and the outbound goods is still under pressure.

The stronger oil prices and futures in October and the pull-ups of petrochemicals helped the market to a certain extent.

Spot prices were firmer and mainly adjusted within a narrow range. The mid-season futures continued to break, hitting market confidence. Some petrochemical regions continued to lower prices causing weak cost support, and merchants' stock dumping behavior. All three major varieties of PE fell to varying degrees.

The enthusiasm of downstream factories to enter the market has not improved, and more wait-and-see attitudes. Manufacturers continue to have poor shipments and the trading atmosphere is light.

In the later period, as the linear futures fluctuated higher, the merchants' mentality was better, and they were more active in reporting.

However, the atmosphere of taking goods downstream did not improve, and they continued to suppress the market mentality. The plastic market rebounded only slightly, and then continued to be weak.

3. Market Forecasting

In 2019, polyethylene is generally in a downward trend. Until the end of the year, the degree of profitability is relatively limited, and the market is still low and weak.

SunSirs’ polyethylene analyst believes that at present the pressure on the supply side of polyethylene is still relatively large and demand is still in an oversupply pattern. Polyethylene prices are already in a low position.

It is expected that the market will continue to be weak in 2020, except for the maintenance season and downstream. In addition to the large fluctuations that may occur in the traditional purchasing season, the overall change will be less than this year.

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