SunSirs: Polyethylene (PE): Off-Season for Agricultural Films Drags Down Demand; Unstable Costs Lead to Weak Prices

In May, the domestic polyethylene market generally exhibited a pattern characterized by unstable cost support, a slight contraction in supply, the onset of the off-season for demand, and weak, fluctuating prices. The conclusion of spring plowing led to a rapid cooling of demand for agricultural films, resulting in sluggish downstream purchasing activity. Compounded by crude oil price volatility—which drove cost instability—PE spot prices lacked upward momentum and continued to trade within a weak range.

I. Spot Market Performance (May 21)

Today, domestic polyethylene spot prices remained largely stable with slight dips; trading activity was light, driven primarily by sporadic purchases to meet immediate downstream needs.

SunSirs Benchmark Prices (May 21): LLDPE at 8,250 RMB/ton, LDPE at 11,283 RMB/ton, and HDPE at 10,180 RMB/ton—all of which showed a slight downward trend over the course of the month.

Mainstream Quotes: LLDPE ranged from 8,150 to 8,350 RMB/ton; LDPE from 11,100 to 11,400 RMB/ton; and HDPE (wire drawing grade) from 10,050 to 10,250 RMB/ton.

Market Trends: The morning session saw narrow-range consolidation; transactions at higher price points were sluggish, downstream buyers showed weak willingness to accept deliveries, and a strong "wait-and-see" atmosphere prevailed in the market.

II. Domestic Capacity and Supply

Total domestic polyethylene production capacity exceeds 30 million tons. In May, an increase in scheduled plant maintenance led to a tightening of supply.

The industry operating rate stood at 74.33%, with a weekly output of 615,800 tons—a month-on-month decrease of 2.42%—as maintenance activities at various facilities resulted in reduced supply volume.

Short-term supply pressure remains low; however, with an expected increase in plant restarts in June, supply is projected to rebound in the coming period.

III. April Import and Export Overview

In April 2024, polyethylene import volumes saw a slight month-on-month increase but a year-on-year decline, while export volumes maintained their resilience:

Import Volume: Ranged between 1.02 million and 1.05 million tons—a year-on-year decrease of 4.8%. With supplies from the Middle East facing constraints, the overall import market remained relatively tight. Export volumes declined month-on-month, yet they remain at a high level compared to the same period in recent years; overseas demand continues to divert a certain portion of domestic supply.

IV. Current Inventory Status

Domestic social inventories of PE (polyethylene) saw a slight month-on-month decline; however, inventories held by manufacturers accumulated slightly, while port inventories remained at moderate levels.

Overall inventory pressure remains manageable; nevertheless, downstream buyers are exercising caution in their purchasing, leading to a slowdown in the pace of inventory destocking and providing only limited support to prices.

V. Key Price Drivers

Heightened Volatility in Cost Inputs

International crude oil prices have experienced wide fluctuations, driven by the shifting dynamics of US-Iran negotiations; consequently, cost support for polyethylene has become unstable, causing PE prices to fluctuate in tandem.

Temporary Contraction in Supply

May saw a concentration of scheduled plant maintenance shutdowns, resulting in a month-on-month decline in production output. However, with clear expectations for plant restarts in the near future, supply pressure is projected to gradually intensify.

Significant Weakening in Demand (Key Bearish Factor)

Spring plowing activities have largely concluded, and the agricultural film sector has entered its traditional off-season: demand for mulching film has essentially evaporated, orders for greenhouse film have dropped sharply, and plant operating rates continue to slide. Manufacturers are currently adopting a "production-to-order" strategy—producing only to meet immediate sales—and engaging primarily in "rigid-demand" restocking; consequently, purchasing momentum for polyethylene has weakened significantly.

While demand from sectors such as packaging film and injection molding remains stable, it is insufficient to offset the drag caused by the downturn in the agricultural film market.

Market Sentiment and Purchasing Behavior**

Downstream players hold a bearish outlook regarding future market trends and exhibit extremely low willingness to build up inventory stockpiles. Instead, they adhere to a "buy-as-needed" strategy, resulting in a market environment that lacks the impetus typically provided by concentrated restocking activities.

VI. Current Status of Downstream Agricultural Film Sector: Distinct Off-Season Characteristics

Demand: Demand for mulching film has essentially ended, with only minor restocking of replacement film occurring in the Northwest and Southwest regions; the greenhouse film sector is transitioning into its off-season, resulting in sparse order volumes.

Operating Rates: Operating rates within the agricultural film industry have continued their month-on-month decline, currently hovering at a low point for the year.

Pricing: Quotes for "double-protection" film in Shandong range from 9,800 to 10,200 RMB/ton, while in East China, they range from 10,300 to 10,600 RMB/ton. While quoted prices remain stable, actual transaction volumes remain weak.

Purchasing: Procurement of polyethylene raw materials is currently dominated by small-volume orders driven solely by immediate, rigid demand. Purchasing enthusiasm remains sluggish, serving as the primary drag on overall PE demand at present.

VII. Outlook and Forecast

Polyethylene prices are expected to maintain a pattern of weak, volatile fluctuation. Given the ongoing plant maintenance shutdowns, relatively low inventory levels, the persistence of the agricultural film off-season, and sluggish downstream purchasing activity, PE prices will likely continue to face downward pressure.

If you have any inquiries or purchasing needs, please feel free to contact SunSirs with support@sunsirs.com.