SunSirs: Forecast for China's Polyethylene Spot Market Trends in the Second Half of 2026

I. SunSirs Benchmark Prices for Polyethylene Grades (July 6)

1. LLDPE Benchmark Price: 7,300.00 RMB/ton; remained flat intraday; saw a slight decline from the beginning of the month; currently sits in the low-to-mid range for the year.

2. LDPE Benchmark Price: 9,150.00 RMB/ton; down 0.9% from 9,233.33 RMB/ton in early July; the annual price percentile remains in the low-to-mid range.

3. HDPE Market Spot Prices (Mainstream): 7,470–7,830 RMB/ton; saw a slight intraday increase of 50–100 RMB/ton; currently fluctuating within a narrow range in the short term.

II. Review of the Polyethylene Market in the First Half of the Year: Extreme Divergence in Process Profitability

In the first half of the year, profit margins for the two major polyethylene production routes showed a starkly split pattern, driven primarily by crude oil price volatility caused by geopolitical conflicts:

1. Oil-based Polyethylene: Profits fell 63.85% year-on-year, with enterprises suffering deep, prolonged losses. Geopolitical tensions drove a sharp rise in crude oil prices during March and April; since naphtha accounts for 65%–75% of production costs, the surge in raw material prices—combined with a lag in passing costs on to finished product prices—pushed production costs past the 10,000 RMB/ton mark at one point. Losses narrowed slightly only after crude oil prices retreated in May. Dragged down by these losses, most oil-based plants voluntarily reduced operating rates and undertook concentrated maintenance, leading to a continuous decline in industry operating rates.

2. Coal-based Polyethylene: Profits surged 274.06% year-on-year, peaking in March. Coal prices were less affected by overseas geopolitical disturbances, and coal feedstock accounts for only 20%–25% of production costs. Enterprises with their own domestic coal mines enjoyed highly stable costs and maintained high operating rates throughout the first half of the year. Although profits shrank slightly in May as downstream product prices weakened, overall profitability for the year remained significantly better than that of the oil-based route.

3. Root Cause of Divergence: The disparity stemmed from two factors—differences in the magnitude of raw material price fluctuations and differences in the proportion of raw material costs within total production costs. These were compounded by shipping disruptions in the Strait of Hormuz during the first half of the year, which amplified the cost gap due to supply disturbances affecting overseas oil-based feedstocks. III. Domestic Spot Market, Supply, and New Capacity Outlook

1. Regional Spot Market Trends (Early July)

The market is currently in the traditional off-season for demand; overall trading is driven primarily by essential procurement, with traders showing no inclination to stockpile. Prices are fluctuating within a narrow range:

- North China/Shandong Markets: Prevailing prices are 7,200–7,370 RMB/ton for LLDPE, 7,470–7,750 RMB/ton for HDPE, and 9,000–9,270 RMB/ton for LDPE.

- East China Port Supplies: Linear grade material is priced at 7,250–7,400 RMB/ton; arrivals of overseas cargo are gradually increasing, placing downward pressure on port spot prices.

- South China Region: Trends mirror the weakness seen in East China; operating rates in downstream packaging and injection molding sectors remain low, resulting in sluggish trading. 2. Domestic Production and Pressure from New Capacity Coming Online in the Second Half

In the first half of the year, oil-based production saw reduced operating rates due to losses, while coal-based production maintained high loads, leading to a periodic contraction in overall industry output; however, the supply side is set for a surge of new capacity in the second half:

1. New domestic polyethylene capacity totaling 2.6 million tons is scheduled before September, with the total new capacity for the year exceeding 4 million tons. The fourth quarter marks the peak of new production launches; the influx of new supply will continue to impact the spot market, suppressing the industry's overall profit baseline;

2. Cost dynamics drove divergent operating rates: a pullback in crude oil prices improved margins for oil-based producers, prompting the gradual restart of previously idled units; conversely, rising costs for coal-based producers dampened their willingness to maintain high operating loads. Nevertheless, the industry's overall operating rate remained high, with domestic monthly output consistently tracking in the upper range for the year;

IV. Polyethylene Import and Export Data (First Half) and Year-on-Year Comparison

1. Imports (Customs statistics for January–May)

Cumulative domestic polyethylene imports for January–May totaled 4.5514 million tons, a sharp year-on-year decline of 24%, primarily driven by shipping disruptions in the Middle East:

- Monthly trends: Average monthly imports were 1.124 million tons from January to March, dropping to 0.6715 million tons in April and just 0.5089 million tons in May. May’s import volume hit a ten-year monthly low; shipments from Iran virtually stalled, while overseas cargoes were diverted to Europe and Turkey;

- Across-the-board decline: Imports of HDPE, LDPE, and LLDPE all contracted simultaneously, showing decreases both year-on-year and month-on-month.

2. Exports (Customs statistics for January–May)

Cumulative exports for January–May totaled 1.4392 million tons, a massive year-on-year surge of 247%. Exports became a crucial channel for diverting domestic supply, with the market briefly shifting to a net export position in May:

- Export volumes were low in the first quarter; however, a shortage of overseas supply starting in March drove a surge in domestic exports, with monthly volumes exceeding 0.5 million tons in both April and May;

- Key destinations included Southeast Asia and countries along the "Belt and Road" initiative; exports of commodity-grade materials saw significant growth, while demand for high-end specialty grades steadily increased. 3. Forecast of Import and Export Trends for the Second Half of the Year

1. Imports: With the full resumption of navigation through the Strait of Hormuz and the recovery of shipments from petrochemical facilities in Iran and the Middle East, import volumes are expected to rebound between July and September, with monthly estimates rising to 658,000–969,000 tonnes. While the influx of overseas supplies will continue to weigh on domestic spot prices, the overall tightness of global raw material supplies makes it unlikely that import volumes will return to the high levels seen in previous years.

2. Exports: As overseas markets enter the traditional off-season for chemicals and local production facilities abroad resume operations, external purchasing demand is weakening. Consequently, monthly export volumes are expected to drop significantly in the second half of the year; the role of exports in diverting domestic surplus supply will diminish sharply, making it difficult to offload excess domestic inventory to overseas markets.

V. Current Status of Domestic Downstream Demand and Outlook for the Second Half of the Year

July marks the traditional off-season, with overall downstream operating rates remaining low—averaging between 30% and 55%. Demand for linear-grade materials is dragged down by the off-season for agricultural films, while orders for packaging films, blow-molded products, and pipes remain lackluster. Demand remains steady only for high-end specialty materials—such as photovoltaic backsheets and lithium-ion battery separators—but these account for a small share of total consumption and cannot offset the weakness in traditional sectors. Processing plants are maintaining a "buy-as-needed" strategy, with no significant centralized restocking activity.

VI. Comprehensive Phased Forecast of Polyethylene Trends for the Second Half of the Year

1. Supply: The resumption of oil-based production facilities and the continued influx of overseas imports will result in ample domestic supply; as new production capacity gradually comes online, market inventory will continue to accumulate.

2. Demand: The traditional off-season is suppressing downstream operating rates, with only minor, sporadic demand driven by limited stockpiling of greenhouse films; exports are weakening simultaneously, offering insufficient relief for domestic surplus.

Spot price levels will shift downward, with the market trending weakly; temporary, short-lived rebounds may occur due to sudden geopolitical disruptions or large-scale, concentrated maintenance shutdowns at major facilities, but no sustained upward trend is expected.

Overall, the loose supply-demand balance in the polyethylene spot market is unlikely to reverse in the second half of the year. Prices will generally fluctuate with a downward bias: the market will undergo a period of narrow-range bottoming in the third quarter, followed by increased downward pressure in the fourth quarter as new supply is released en masse; no sustained upward trend is anticipated for the year.

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