Following the New Year holiday, the commodity plastics market staged a robust rebound. The sharp climb from earlier low-level fluctuations to current significant gains in the LDPE (low-density polyethylene) market is no coincidence. It stems from the combined effects of supply contraction, geopolitical disruptions, and the interplay between futures and spot markets.
Comprehensive supply contraction lies at the core of LDPE's market rebound. Entering January 2026, domestic LDPE plants entered maintenance periods. Maoming Petrochemical's No. 1 LDPE unit shut down, while its No. 2 unit operated with limited supply for certain grades. Shanghai Petrochemical's high-pressure units also faced structural supply gaps. Zhejiang Petrochemical's Phase II high-pressure units halted production on the 8th, with a planned restart on the 19th, directly leading to a substantial increase in LDPE maintenance-related output losses. More critically, excessive destocking earlier led to a genuine shortage of spot resources after the holiday. Traders held notably low inventories, with market stocks operating at depressed levels. Both producers' and social warehouse inventories had been successfully depleted, heightening traders' reluctance to sell and further intensifying the spot market's tightness.
Geopolitical tensions simmer beneath the surface, with the ongoing deterioration of the situation in Iran becoming a variable for the LDPE market. For polyethylene products, cumulative import data from January to November 2025 shows LDPE as the only variety experiencing import growth. Iran consistently ranks among the top three trading partners for China's LDPE imports. Given this high import dependency, short-term bullish sentiment in the LDPE market is unlikely to subside.
Synergistic movements in the futures market have bolstered LDPE's rebound. During the New Year holiday, international geopolitical risks fueled concerns over crude oil supply, creating a bullish sentiment in China's chemical market and sustaining the futures market's upward trajectory. The robust performance in futures markets transmitted positive sentiment to the spot market, driving synchronized price increases. This futures-spot linkage further strengthened traders' confidence in pricing, propelling LDPE prices steadily higher.
However, underlying this rebound is persistent weakness in demand. The current period coincides with the traditional off-season for LDPE downstream sectors like greenhouse film and packaging. Domestic agricultural film production capacity utilization has dropped to 37.89%, down 10.23 percentage points from early December, while PE packaging film capacity utilization has also declined to 48.96%. Downstream factories, squeezed by rising raw material costs, have seen their profit margins significantly compressed. Their willingness to purchase has become increasingly cautious. Faced with persistently climbing prices, resistance to high costs is growing more pronounced, with some enterprises even opting to switch to substitutes like LLDPE. Notably, plans by some downstream factories to enter the Spring Festival holiday early in late January will further weaken short-term demand support, constraining the upward momentum of LDPE prices.
Looking ahead, LDPE prices are expected to remain volatile at elevated levels in the near term. Plant maintenance will persist, making it difficult for supply shortages to improve fundamentally within 1-2 weeks. Combined with low inventory levels, this support should keep prices elevated. However, in the medium term, the market may face renewed downward pressure due to the concentrated release of new capacity and weakening demand.
If you have any inquiries or purchasing needs, please feel free to contact SunSirs with support@sunsirs.com.
