According to Futures Daily, the plastic futures market in July has been characterized by a tug-of-war between bullish and bearish factors: strengthened cost support, steadily recovering supply, weak off-season demand, and a slow accumulation of inventories. The plastic futures 2609 contract has maintained a trend of fluctuating with a bullish bias, with the price center shifting up to the 7,150 RMB/ton level.

Steady Expansion of Supply

Domestic plastic supply continues to rebound, showing a trend of steady expansion. The peak season for spring plant maintenance has passed; coal-chemical and oil-chemical facilities that were previously shut down for maintenance have restarted production en masse, continuously releasing effective market capacity. As of early July, the weekly operating rate of domestic PE producers remained above 74%—a significant recovery from mid-to-late June—with weekly output stabilizing at a high level of around 610,000 tonnes, ensuring ample domestic supply. Meanwhile, the coming online of new capacity has further intensified supply pressure. New facilities, such as those at Tarim Petrochemical, entered the production ramp-up phase in July and will continue to add incremental volume to the market. Import supply is also abundant; shipping disruptions caused by geopolitical tensions in the Middle East have gradually subsided, and navigation conditions in the Strait of Hormuz have improved compared to the previous month. Following a recovery in import margins, the volume of low-priced overseas cargo arriving at ports has steadily increased. The overall domestic supply landscape is loosening, and expectations of a plastic supply surplus in the second half of the year are mounting.

Weak Downstream Consumption

Demand remains constrained by the characteristics of the traditional off-season, acting as the primary bottleneck preventing a market rally. Currently, the overall weighted operating rate of downstream plastic sectors sits at the lower end of the annual range; performance varies across specific demand segments, but the overall trend is weak. The agricultural film market has entered its traditional off-season; end-product manufacturers face a lack of orders and low operating rates, with no demand for bulk restocking. Major downstream sectors such as packaging and injection molding are grappling with sluggish end-user consumption and high inventories of finished goods; enterprises are prioritizing small-batch, on-demand production and show little willingness to stock up on a large scale. Although the pipe sector is supported by expectations of infrastructure-driven growth policies, the pace of actual project implementation remains slow; consequently, operating rates at downstream pipe manufacturers remain stable, with limited growth in demand. Overall, downstream enterprises are generally maintaining low inventory levels and exercising caution regarding spot market purchases; consequently, they are struggling to absorb the incremental supply entering the market, and the pattern of a fragile supply-demand balance persists.

Inventory pressure is becoming apparent.

Following a period of inventory reduction in June, both factory-level and social inventories within the domestic plastics industry entered a phase of gradual accumulation in July. Currently, producer inventories remain above 570,000 tonnes—showing a slight month-on-month increase—while trader inventories have also risen marginally. Sluggish demand during the off-season has slowed the circulation of goods; factories face pressure to move stock, causing inventory to shift gradually from the production sector to the trading sector.

However, the pace of inventory accumulation remains relatively moderate, with no signs of a massive backlog of goods. Should demand remain weak, continued inventory buildup would likely constrain the market's price elasticity.

In summary, while the rebound in international crude oil prices has bolstered cost support for plastics, this support lacks sustainability. The fundamentals of plastics futures are characterized by strong supply, weak demand, and stable inventory levels. With bullish and bearish forces currently in relative equilibrium, plastics futures are expected to undergo a period of range-bound consolidation in the near term.

SunSirs has been continuously tracking price data for over 200 commodities for nearly 20 years, please contact support@sunsirs.com for subscription.