Recently, there has been a significant increase in domestic polyethylene prices, led by LDPE. It is the result of international geopolitical conflicts, rising costs, improvement in domestic supply and demand margins, and market sentiment resonance. The core driving force is the Middle East situation pushing up oil prices, import disturbances, and downstream resumption of work and replenishment.
According to the monitoring of the commodity market analysis system of Shengyi Society, the average price of LLDPE (7042) was 6605 yuan/ton on February 27th and 7125 yuan/ton on March 3rd, an increase of 7.87%. LDPE (2426H) had an average price of 8683 yuan/ton on February 27th and 9450 yuan/ton on March 3rd, an increase of 8.83%. The average price of HDPE (5000S) on February 27th was 7312 yuan/ton, and on March 3rd it was 7637 yuan/ton, an increase of 4.44%.
1. International geopolitics and cost side
Crude oil prices skyrocket, with strong support from the cost side
In early March, the situation in the Middle East escalated, Iran related conflicts intensified, and shipping risks in the Strait of Hormuz increased. Recently, international crude oil prices have surged significantly, directly driving up polyethylene spot prices.
Import sources and logistics are obstructed
Iran is an important source of PE imports for China, with LDPE accounting for 14%, HDPE accounting for 11%, and LLDPE accounting for 3%. LDPE has the highest dependence on imports. The conflict has led to a shortage of Iranian goods and delayed shipping schedules. Oil tankers are forced to detour around the Cape of Good Hope, leading to a significant increase in import costs and tight spot supply.
2. Domestic supply side
Concentrated short-term supply reduction during device maintenance
In March, there was no new production capacity added domestically, but there were more maintenance facilities, resulting in a decrease in capacity utilization compared to the previous month and a tightening of supply margins.
High inventory but accelerated destocking
After the end of February, the inventory was high, but on March 3, after the Yuanxiao (Filled round balls made of glutinous rice-flour for Lantern Festival) Festival, the downstream resumed work faster, the inventory reduction was accelerated, and the market shifted from “digesting inventory” to “replenishing inventory” to support prices.
3. Demand side
The peak season for downstream resumption of work and agricultural film production has begun
After the Yuanxiao (Filled round balls made of glutinous rice-flour for Lantern Festival) Festival, downstream projects such as packaging, injection molding and pipe materials resumed in an all-round way, and the operating rate rose rapidly; In March, we entered the peak season for traditional agricultural film demand, with an increase in the purchase of plastic film and greenhouse film, which resonated with the demand for replenishment and storage.
4. Market sentiment and futures driven
On March 2-3, the main LLDPE contract of Dashang Exchange hit the daily limit up for two consecutive days, driving up spot prices; Traders have a strong bullish sentiment, being reluctant to sell and pushing up prices, further pushing up prices.
Short term polyethylene prices are still relatively strong, but attention should be paid to whether the situation in the Middle East has eased and whether oil prices can continue; The speed of domestic inventory turnover and the realization of downstream actual demand; Supply recovery status after maintenance is completed. If geopolitical conflicts persist and demand continues to rebound, prices are expected to remain strong; If oil prices fall back and demand falls short of expectations, the increase may narrow.
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