SunSirs: Amidst a Triple-Layered Tug-of-War, China PE Prices Fluctuate with a Downward Bias

According to data from SunSirs' "Spot Connect" service: The average price of LLDPE (7042) stood at 8,441 RMB/ton on May 15 and 8,386 RMB/ton on May 22, marking a decline of 0.65%. The average price of LDPE (2426H) was 11,300 RMB/ton on May 15 and 11,116 RMB/ton on May 22, down 1.62%. The average price of HDPE (5000S) was 10,320 RMB/ton on May 15 and 10,237 RMB/ton on May 22, a decrease of 0.80%.

Supply Side: Support from plant maintenance is waning, leading to a marginal easing of overall supply. Although the reduction in output caused by plant maintenance during the week still provided some degree of support, facilities that had previously undergone maintenance are gradually restarting. Consequently, the industry's operating rate continues to rebound from its recent lows, and pressure on the overall supply side is gradually becoming apparent. Social inventories remain at a neutral-to-high level; early signs of inventory accumulation are emerging for certain product grades. Coupled with the replenishment of supplies via imports, the overarching trend of ample market supply remains unchanged, exerting continuous downward pressure on prices.

Demand Side: Characteristics of the "off-season" are pronounced, with purchasing driven primarily by immediate, essential needs. The traditional peak season for agricultural films has largely concluded, and operating rates among downstream end-users remain at low levels, eliminating the primary driving force for PE demand. Demand in other downstream sectors—such as packaging, injection molding, and piping—is similarly lackluster; orders consist mostly of short-term, immediate requirements, leading downstream enterprises to adopt a "buy-as-needed" strategy and resulting in sluggish market trading activity.

Cost Side: High oil prices provide strong bottom-line support. Influenced by recurring geopolitical conflicts in the Middle East, crude oil prices continue to fluctuate at high levels. This provides robust bottom-line support for the market, effectively limiting the potential for any drastic decline in PE prices.

Barring any unexpected shifts in crude oil markets or downstream demand, PE prices are highly likely to maintain their current pattern of fluctuation with a downward bias. The potential for price rebounds remains capped by demand constraints, while the downside risk is limited by cost-side support. Market participants should closely monitor trends in crude oil prices, downstream trading activity, and plant operational dynamics.

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